Macro Morning

By Chris Becker 

The May US non farm payroll was one of the weakest job prints since the GFC, which of course meant that Wall Street rallied as this structural problem will result in lower rates by the Fed. The USD fell to a two month low against almost everything, with Euro breaking out of its near year long decline, while the anticipated trade war with Mexico fizzled out as Trump removed the threat of tariffs over the weekend.

Markets will be closed here in Australia but Japan is printing its final GDP print while Chinese trade balance figures are out as well.

Friday saw Asian stock markets in a positive mood although Chinese bourses were closed. The Shanghai Composite was in almost free fall during the week, remaining well below the critical 2900 point support level, while the Hang Seng Index is at 26965 points, still off by nearly 10% in the last month. The daily chart shows a potential bottoming pattern here with the 27000 point area as key resistance to rise above in the coming days, where there is growing probability of a swing higher on better sentiment:

Japanese share markets advanced firmly after a series of scratch sessions previously with the Nikkei 225 closing 0.5% higher to 20884 points, starting to build above the key terminal and psychological support level at 20000. Futures are up strongly for today’s session, with the previous oversold mood translating to a swing higher here to try to get back above the high moving average:

Australian stocks had another great day with a nice surge to end the week, the ASX200 closing nearly 1% higher to 6443 points, easily brushing past previous resistance at 6400 points. SPI futures are up 0.5% on the continued rebound on Wall Street, so this should support a rally back to the previous early May high:

European stocks were also quite bullish, despite a huge lift in Euro with the German DAX lifting 0.7% higher, finally able to close above previous key support at 12000 points yet again and providing hope that the May dip is finished. The daily chart is slowly moving out of its weak position with oversold momentum now rebounding suggesting this swing play could translate into a proper comeback:

Wall Street will be the driver for continued positive risk sentiment with the Fed put helping the BTFD crowd to step in and then some. The S&P500 finished 1% higher to 2873 points, now building solidly above the former resistance 2800 point level and the former downtrend line on the daily chart. This is looking very promising for a short term return to the former high, but volatility may not be your friend here:

Currency markets were relatively subdued during the NFP print and while Euro spiked against USD, it was part of a week long rally sending it through the 1.13 handle again. The four hourly chart shows a significant break above the weekly downtrend line from the September 2018 highs, so it’s safe to say despite the dovish ECB, the new mood and direction for Euro is up:

The USDJPY pair is still trying to find a bottom here with a potential breakout on the cards this week despite the fall in USD on Friday night in the fallout of the terrible NFP print. Risk sentiment is seeing a small selloff in Yen here so watch the session highs on the four hourly chart for signs of another breakout, with momentum ready to punch through:

The Australian dollar oscillated around the 70 cent level vs USD with a small swing above on Friday night where it sits waiting for the open this morning in an oversold position. While there is firm support at the 69.50 level it will be very telling if it cannot breach the previous monthly support level just above 70 cents this week despite the much weaker USD:

Oil prices came back at little more on Friday night with both Brent and WTI lifting nearly 2% with the latter closing just above the $54USD per barrel level. There is greater potential now for a bottom here at the previous monthly support level, but it could also be a pause before breaking again and potentially making its way down to $42 as it likes to overshoot the fundamentals:

Finally to gold, which is really trying hard to punch through its recent surge, and with the flip in USD due to the NFP on Friday night saw another new daily high to finish at the $1340USD per ounce level. If it can beat those March highs at $1345 or so, a decoupling with USD is on the cards:

Glossary of Acronyms and Technical Analysis Terms:

ATR: Average True Range – measures the degree of price volatility averaged over a time period

ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility

CCI:  Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)

Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement

FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)

BOJ/Abenomics: Bank of Japan, economic policy/direction enacted by PM Shinzo Abe

DOE: US Department of Energy 

Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out!

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