Macro Morning

By Chris Becker 

A relatively quiet night on markets with stocks and other risk assets rising slightly, while Treasury yields fell as the probability of the Federal Reserve cutting rates rose. In the UK, the first round of voting on the new Tory leader resulted in Boris Johnson in the front, which confirms more chaos on the way for Brexit wrecked UK.

The economic calendar here in Asia today will focus on the trifecta of secondary reports from China, namely industrial production, retail sales and fixed asset investment.

Yesterday, Chinese share markets diverged with the Shanghai Composite holding steady to remain just above the 2900 point barrier, while the Hang Seng Index continues its retreat as protests rage on the streets outside, falling another 0.6% to 27129 points. The daily chart is showing price wanting to retest the former lows but there is some internal buying support holding on:

Japanese share markets are deflating now after a spate of scratch sessions with the Nikkei 225 falling over 0.5% to close at 21032 points. Part of this is due to the strength in Yen with the USJDPY pair still melting lower. Futures are down only slightly so we’re likely to see a market treading water today given some better risk sentiment overnight:

The ASX200 was the best performer, only falling a handful of points to close at 6542 points, absorbing the unemployment print as banks continue to outperform. SPI futures are up nearly 10 points, but this is an incredibly overbought and crowded market for mind. I’m watching the high moving average for signs of an inversion and another dip:

European stocks are still in a positive mood although the FTSE closed with a scratch session in the wake of the Johnson vote, while the German DAX lifted 0.4% to claw back its recent loss, closing at 12169 points, still building above previous key support at the 12000 point level. The daily chart is still somewhat in a weak position but this rebound could get more steam here if it breaks overhead resistance at the 12200 point level:

Wall Street is trying to get back some momentum and last night saw mild increases particularly tech stocks while the broader industrials pushed the S&P500 0.4% higher but still unable to get back above the psychologically important 2900 point level to close at 2891 points.  There is still the chance of a rollover here as I’m watching the four hourly ATR support level at 2870 closely with no new high for the week yet:

The USD continued to firm against most of the majors overnight with the Euro again remaining below the 1.13 handle with the four hourly chart suggesting a deceleration pattern into the 1.1260 support area. With trailing ATR support and momentum oversold there is more potential for lower prices however:

The USDJPY pair is still trying to get out of its bottoming pattern here but another series of lower session highs is keeping it well away from trailing ATR resistance at the 108.70 level . Risk sentiment is not translating into any correlated moves here and this action still suggests a pullback to the 108 handle proper and possibly last weeks lows:

The Australian dollar continues its own deflation, heading straight for the 69 handle overnight before a very small blip kept it just above that area this morning. Firm support at the mid 69’s from last week is now gone following yesterday’s unemployment print, so its back to monthly support at the 69 cent level proper that all eyes will be on tonight:

Oil prices came back slightly as a result of the tank attacks in the Gulf, but the warmongering hasn’t been enough to see any new daily highs with the WTI contract finishing just above the $52USD 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 hope is climbing every higher despite a stronger USD with another rally overnight to make a new daily high, finsihing at the $1341USD per ounce level. This is nearly back at the former highs near the $1350 level (upper black horizontal line):

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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