Macro Morning

By Chris Becker 

Hope is rising on risk markets that this weekend’s G20 summit – more rightly a G2 summit between US and China – will result in some sort of ceasefire at least over the trade war. US stocks rose while European bourses slipped despite a higher German CPI print. The USD was largely unchanged, while Treasuries rallied again with the 10 year yield falling to 2% flat.

Looking at yesterday’s action in Asia first, where the Shanghai Composite bounced back to life, closing nearly 0.7% higher to almost get over the 3000 point barrier while the Hang Seng Index advanced much further, closing nearly 1.5% higher to 28671 points. The daily chart stabilised after a recent small dip and has now matched the previous daily high, almost signalling another breakout:

Japanese share markets advanced as Yen sold off during the day with the Nikkei 225 taking back the two previous poor sessions to finish over 1% higher to 21338 points.  Futures however are suggesting another good 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 relatively poor session, only advancing about 0.3% to close at 6666 points although several key issues like BHP had new record highs that got the bulls excited.  SPI futures are down 10 points or so, despite the positive lead from Wall Street, even so there should be a firm finish to the week where the bears haven’t done well:

European stocks continue to track sideways with the German CPI print only lifting the German DAX, but just barely, up 0.2% to finish at 12271 points. The daily chart shows how price must remain supported at former trailing resistance at 12200 points so this series of two very minor advances may suggest the dip is over for now but its precarious:

On Wall Street it was mixed as the DOW had a scratch session while the NASDAQ and S&P500 finished with some firm moves, the former up 0.7% while the broader industrials were up 0.3% or so. The daily S&P chart shows price respecting the low moving average at the key psychological support at 2900 points, which must hold or its a swift fall to 2850 or lower:

Currency markets were very quiet as traders wind back positions going into the G20 meeting. The USD was flat against almost all the majors with the Euro continue to stabilise here above the mid 1.13s. There’s still 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 had a classic blowoff filled by a consolidating dip overnight, finishing just below the 108 handle and sill below the dominant downtrend line. Like other currencies I’m not expecting much action here today:

The Australian dollar is still pushing higher despite the USD strength as this trend up towards the 70 handle continues. It’s now just over that level but equally the previous weekly high so it’s ripe for a pullback and sudden inversion – a favourite trade as this gets very crowded, and for little reason:

Oil prices are pulling back from their recent volatile moves, with the WTI contract remaining above the $59USD per barrel level. Daily momentum is positive and price action poised to revisit the former highs at the $66 level, but as always watch for violent moves and manage the trade to absorb external catalysts:

Finally to gold, which after getting way ahead of itself to retrace from its blowoff high, has stabilised somewhat to finish at the $1409USD per ounce level again overnight. So far, so good, but a little more retracement in the short term would make sense, but the $1400USD level must be supported for this new trend to have any change of beating the multi-year bearish market:

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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