Macro Morning

By Chris Becker 

The risk market complex started the week in fine form as backstops from the world’s central banks continue to inflate stocks in particular. Wall Street glided along on the Fed put and better relations with Mexico due to the tariff cancellations, with the USD firming slightly against the other major currencies. The Brexit saga is having a material impact on the UK economy with the industrial heart shrinking again at a pace four times that calculated by the Brexiteers. Short term pain for long term, err gain?

Markets reopen here in Australia with the NAB local business confidence print early this morning, followed by Chinese new loan finance figures that bear (sic) watching.

Chinese share markets reopened from their long weekend with the Shanghai Compsite advancing 0.8% to be just below the key 2900 point resistance level while the Hang Seng Index is brushing off domestic turmoil to soar over 2% higher, finishing at 27578 points. The daily chart showed the potential bottoming pattern here with the 27000 point area as key resistance that level to beat, with a big engulfing candle here doing so in spades! Is this the start of a relief rally or just a swing higher? A close above trailing ATR resistance and positive momentum should be enough to confirm the former:

Japanese share markets advanced also with the Nikkei 225 closing 1.2% higher to 21134 points, really getting steam behind it as it builds way above the key terminal and psychological support level at 20000. Futures are up again for today’s session, with the previous oversold mood translating to a swing higher here as price stays above the high moving average but I’m wary of the internal strength of the Yen that could drag down medium term aspirations:

Australian stocks were closed for the Queen’s Birthday weekend with SPI futures indicating a rise of 0.2% or more on the open for the ASX200, with the 6500 point barrier likely to be breached. It’s been a great run for Aussie stocks and a lower Australian dollar can only help from here:

European stocks remain quite bullish, despite a firming Euro with the FTSE closing 0.6% higher and although the German DAX was closed for a holiday, futures are indicating it should remain above previous key support at the 12000 point level on its return tonight. 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 continues to be the driver for positive risk sentiment with the Fed put still keeping spirits lifted as stock prices want to return to the April highs. The S&P500 finished 0.5% higher to 2886 points, now leaving the former resistance 2800 point level and the downtrend line on the daily chart far behind. There is still the chance of a rollover here if momentum stalls just above the positive level however:

Currency markets were subdued again with a lot of hesitation now following the NFP print and US trade war ructions. The Euro hasn’t followed through on it spike against USD, but remained above the 1.13 handle again overnight. The four hourly chart suggests a sideways continuation above the weekly downtrend line from the September 2018 highs, so even with a dovish ECB, the continued mood and direction for Euro is up, but I’m watching the low moving average area for signs of an inversion:

The USDJPY pair is still trying to get out of its bottoming pattern here and was thwarted last night with a failed breakthrough above trailing ATR resistance at the 108.70 level again. Risk sentiment should translate into a continued selloff in Yen but its failing to make any new session highs on the four hourly chart so I’m watching for signs of another pullback to the recent lows:

The Australian dollar deflated overnight to fall well below the 70 cent level vs USD with a break below trailing ATR support at the mid 69.50 level. This was firm support and it almost confirms to me that an inability to breach the previous monthly support level just above 70 cents is spelling a new inversion back into the 60s for the Pacific Peso:

Oil prices deflated again with little confidence of a follow through with the WTI contract failing to make any headway to close above the $53USD per barrel level. This may just 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, but its all a bit too much with way overbought technical ending in a selloff overnight to start the week for a new daily low at the $1328USD per ounce level. As I said last week, 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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