Macro Morning

By Chris Becker 

Risk markets are on edge with tensions in the Gulf over Iran and trigger finger Trump, overshadowing the poor manufacturing PMI prints on both sides of the Atlantic. Wall Street had a lucklustre session as interest rates remained depressed, as 10 year Treasury yields remained just over the 2% level.

The economic calendar starts the week relatively quietly in Asia today with a speech by RBA Governor Lowe the key even to watch this morning.

Looking at Friday’s action first, with the Shanghai Composite lifting 0.5% to finish just above the key 3000 point level, finishing off a great week. Meanwhile the Hang Seng Index fizzled, falling about 0.3% to 28473 points. The daily chart had put on a series of gaps higher above ATR resistance but this rally went a bit too far too fast, so we should see a small retracement on the open today:

Japanese share markets continue to struggle due to a stronger Yen with the Nikkei 225 retracing nearly all the positive moves during the week to finish 1% lower at 21258 points. Futures are suggesting a push back down below the 21000 point barrier, to continue the series of lower daily highs, giving this breakout a false signal:

The ASX200 lost just over half a percent, unable to make good on further record highs, closing at 6650 points.  SPI futures are down a further 0.25% or so, which could just be a temporary retracement with very strong support at the 6500 point level likely to be filled as no one wants to miss out on this rally:

European stocks were very cautious throughout the Friday session with both the FTSE and German DAX unable to breach firm resistance overhead, with the latter slipping to 12339 points. The daily chart shows how price has been unable to beat the April highs near the 12500 level with two dangerous looking candles in a row suggesting the next price pattern will be a big retracement back below former trailing resistance at 12200 points:

Wall Street fell slightly across the board with tech stocks down the most, off by 0.25% while the S&P500 finished a few points lower to 2950 even. This keeps is right on the former 2018 highs as seen on the weekly chart below, but internal momentum is weakening and rolling over here:

The USD fell against most of the majors, with the Euro starkly reversing despite all the dovish commentary from the ECB. The weekly chart is quite illustrative, showing how the recent decline has bottomed out at the 1.12 handle but the recent swing higher making a new weekly high and possibly signalling a major counter trend:

The USDJPY pair failed to pull off a similar swing higher, cratering through its previous bottoming pattern as price had been unable to get anywhere near the trailing ATR resistance at the 108.70 level. Friday night saw it collapse through to the 107 handle instead, overshooting the daily downtrend line for now:

The Australian dollar had a bounce as a result of USD weakness, not macro strength locally and this bounce up above the 69 handle is unlikely to be sustained up to the early June highs below the 70 handle. Watch the daily chart for the ratcheting down ATR resistance level:

Oil prices are loving the Gulf volatility with the WTI contract continuing to surge to finish above the $57USD per barrel level in a strong finish to the week. Price action had been showing a clear bottoming action with a nice clean breakout but can this sustain itself above trailing resistance at the $60 level?

Finally to gold, which is having a whale of a time here, bursting through to the $1400USD per ounce level in a new yearly high high. Note how price has briefly touched the multi year downtrend line from 2008 – this is a big potential move higher, but is way overbought in the short term:

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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