Macro Morning

By Chris Becker 

Two major factors are keeping markets enthralled at the moment, resulting in scratch sessions for stocks and the usual normal oscillation on currencies. The outcome of the Trump/Xi trade talks this weekend and the too-dovish expectations that the Fed will cut aggressively next month, with Treasuries rising again as interest rate cuts probabilities continue to fall. Gold and Bitcoin are retracing from their blowoff highs as the USD strengthens slightly.

Looking at yesterday’s action in Asia first, where Chinese markets were mixed, as the Shanghai Composite slipped again, falling 0.2% to 2976 points, still unable to get back above the 3000 point barrier. In Hong Kong the Hang Seng Index has bounced the other way, up 0.2% to 28221 points. The daily chart is showing signs of a post dip stabilisation with support at the 28000 point level holding:

Japanese share markets fell again despite a weaker Yen throughout the session with the Nikkei 225 falling 0.5% to a weekly low at 21086 points. Futures however are suggesting a slightly better session today but there’s not much upside potential here as the overall trend remains down with no positive momentum as yet:

The ASX200 had a much milder selloff than expected, losing only 0.25% to 6640 points.  SPI futures are down 15 points or so, but this could change quickly if traders decide to chase the positive returns on Wall Street, where very strong support at the 6500 point level should hold here:

European stocks were again cautious with scratch sessions and minor falls across the continent, with the German DAX finally not making another new daily low, actually lifting 0.1% to 12245 points. The daily chart shows how price must remain supported at former trailing resistance at 12200 points so this dip may be over for now but its precarious:

On Wall Street it was mixed as the DOW and S&P500 finished with very minor scratch sessions while tech stocks boosted the NASDAQ up 0.3% or so. The daily S&P chart shows price hovering just above the low moving average at the key psychological support at 2900 points, which must hold or its a swift fall to 2850 or lower:

The USD only lifted slightly against most of the majors with the Euro stabilising here at the mid 1.13s, not following through on its bearish rising wedge pattern as it fell below the 1.14 handle. There’s substantial support at the 1.1330 level holding things up and although momentum is negative in the short term, I’m watching the 1.1380 level for signs of a breakout:

The USDJPY pair continues it comeback, now back above the 107 handle that should support domestic Japanese stocks today. The overall decelerating pattern has turned into a classic swing trade here but the upside maybe limited to the dominant downtrend at stop at 108.10 or so:

The Australian dollar is trying to push higher despite the USD strength as this trend up towards the 70 handle continues. The signs of exhaustion at the four hourly session highs have been pushed away in the wake of yesterday’s RBNZ meeting but I am watching for signs of a rollover as heady resistance overhead is pressured:

Oil prices continue to benefit from more Gulf volatility and warmongering with the WTI contract advancing again to finish above the $59USD per barrel level. Daily momentum is now positive and price action poised to revisit the former highs at the $66 level, but as always watch for violent inversions:

Finally to gold, which has gotten way ahead of itself to retrace from its blowoff high, retracing swiftly to finish at the $1408USD per ounce level overnight in a spate of profit taking. It remains to be seen if this is just a short term retracement or a reversal, as the overbought levels were pretty obvious, so it will interesting to see if $1400 will be supported:

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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