Macro Morning

By Chris Becker 

A lot of ructions overnight, first being Trump putting his foot in his mouth again over German sanctions, sending Euro lower, while increased tensions over trade with China saw confidence evaporate on Wall Street. The USD is firmer across the board despite a weaker than expected CPI print overnight, while oil prices slumped nearly 4% as bulls abandoned their contracts.

The economic calendar here in Asia today will focus squarely on the local unemployment print for May, as the RBA’s performance on arresting underemployment has been woeful.

Yesterday, Chinese share markets are taking back their recent advances with the Shanghai Composite down nearly 0.6% to 2909 points, while the Hang Seng Index is finally listening to its own domestic turmoil to drop over 1.7%, currently at 27308 points. The daily chart was starting to look promising here but this bearish engulfing candle is clearly signalling a return to the former bottom well below 27000 points:

Japanese share markets are in a state of flux with a flat session until the closing period with the Nikkei 225 falling 0.3% to close at 21129 points. Futures are down, likely making a significant new daily low as the stronger Yen and poor risk sentiment overnight is wiping out confidence here:

The ASX200 tried to continue its advance, with a confident high to start of the session, before tapering in the afternoon to actually close slightly lower at 6543 points, even as the Australian dollar retreated. SPI futures are only up a handful of points, so again I can’t help but be cautious here as the bulls have crowded out the market:

European stocks are no long providing any bullish bent, despite a falling Euro with the FTSE closing 0.4% lower while the German DAX fell about 0.3% in line with other continental bourses, closing at 12115 points, still slightly above previous key support at the 12000 point level. The daily chart is still somewhat in a weak position as this rebound runs out of steam and fails to break overhead resistance:

Wall Street is no longer the driver for positive risk sentiment as the series of scratch sessions turned into proper declines overnight with the S&P500 falling 0.2% and unable to get back above the psychologically important 2900 point level.  I am still considering the chance of a rollover here as momentum stalls so I’m watching the four hourly ATR support level at 2870 closely:

Currency markets saw some action overnight with the USD firming against most of the majors. The Euro slumped back below the 1.13 handle on Trump’s sanction comments with the four hourly chart suggesting an end to this week’s slow melt up rally.  I’m watching the trailing ATR support line for a proper breakdown however:

The USDJPY pair is still trying to get out of its bottoming pattern here but its just a sideways slide here after failing again to breakthrough above trailing ATR resistance at the 108.70 level . Risk sentiment is not translating into any correlated moves here and the failure to make any substantial new session highs on the four hourly chart suggests a pullback to the recent lows:

The Australian dollar continues its own deflation, heading straight for the 69 handle with a new daily low as support fails to hold. Firm support at the mid 69’s from last week is now gone as we move into today’s unemployment print. I’m watching the 69 handle proper for a big inversion:

Oil prices slumped again as confidence disappeared, with both Brent and WTI contracts falling nearly 4% in one session, the latter making a new daily low to finish just above the $51USD per barrel level. I suggested recent price action was just a pause before breaking again and this now has the potential to make its way down to $42 as it likes to overshoot the fundamentals:

Finally to gold, where there’s hope yet despite a weaker CPI print with the shiny metal rallying overnight to finish at the $1333USD per ounce level. This is a nice bounceback, with momentum again overbought so there is potential for a return to the former highs:

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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