Macro Morning

By Chris Becker 

No news was good news for risk markets last night as European stocks advanced while Wall Street had a breather. All the action was in the bond markets with Treasuries all over the place as traders continue to place bets on the magnitude and frequency of the next rate cuts by the Fed.

The economic calendar here in Asia today will include the local Westpac consumer confidence print for May plus the latest CPI figures from China.

Yesterday, Chinese share markets advanced the most with the Shanghai Composite lifting over 2% to 2925 points, finally back above the key 2900 point resistance level while the Hang Seng Index continued to ignore domestic turmoil to lift nearly 0.8%, finishing at 27781 points. The daily chart is looking more promising here for the bottom pickers and swingers but I’d wait for a close above trailing ATR resistance and positive momentum before being convinced:

Japanese share markets advanced again with the Nikkei 225 closing 0.33% higher to 21204 points, helped by some BOJ comments around risk and inflation accommodation and a slightly lower Yen. Futures are up mildly 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 still wary of the internal strength of the Yen that could drag down medium term aspirations:

The ASX200 reopened after the long weekend and made a yearly high, soaring over 1% to close at 6546 points, with bank stocks leading the charge. SPI futures indicating a rise of 10-12 points on the open for the ASX200, as the great run for Aussie stocks continues, I can’t help but be cautious here as this looks very crowded for me:

European stocks are still providing the most bullish bent, despite a firming Euro with the FTSE closing 0.3% higher while the German DAX played catchup after its long weekend, surging nearly 1% higher to build 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 needs to be the driver for positive risk sentiment but last night saw a series of scratch sessions as the S&P500 failed to get back above the psychologically important 2900 point level.  I am still considering the chance of a rollover here if momentum stalls just above the positive level however:

Currency markets were subdued with the Euro slowly melting higher in the absence of bad news, remaining well 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 slowly melted up higher last night after yesterdays failed breakthrough above trailing ATR resistance at the 108.70 level . Risk sentiment should translate into a continued selloff in Yen but its failing to make any substantial new session highs on the four hourly chart so I’m watching for signs of another pullback to the recent lows:

The Australian dollar remained deflated overnight to stay well below the 70 cent level vs USD but no new daily low is at least some good signs of support building. Firm support at the mid 69’s from last weeks is coming into play again but this is looking directionless at best. I’m watching today’s Chinese CPI print for signs of any life:

Oil prices deflated again with little confidence as the WTI contract again failed to make any headway to just 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, where the bugs are still really trying hard to punch through to new monthly highs but the recent swing has come back hard, although there is some bottom picking involved here as the shiny metal finishes slightly lower at the $1326USD per ounce level. There is a small potential for a bounceback, but price has to be supported at the low moving average here or its all over:

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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