Macro Morning

By Chris Becker 

Friday night saw the return of confidence as the G20 meeting got underway in Osaka, with hope surrounding some sort of outcome of the trade spat between the US and China. Stocks on both sides of the Atlantic rose while currencies were relatively flat as oil, gold and Bitcoin in particular had wilder rides.

Looking at the closing action in Asia first, where the Shanghai Composite was unable to turn its recent bounce into a sustained trend, slipping almost 0.6% to be well back below the 3000 point barrier while the Hang Seng Index fell 0.3% to 28542 points. This is disappointing given that the daily chart was a presaging a breakout following the recent small dip after almost making a new daily high previously. However, the positive lead from risk assets on Friday should see a new daily high to start the trading week:

Japanese share markets were very cautious given the mild rally in Yen overnight with the Nikkei 225 falling around 0.3% to finish a lacklustre week at 21275 points. Futures however are suggesting a much better start to the week with some potential upside here as momentum picks up and Yen is sold off. I’m watching the previous daily high at 21500 points or so for a proper breach:

The ASX200 had a very poor session to finish the week, falling 0.7% to close at 6618 points in late afternoon profit taking across the banks and miners. SPI futures are up nearly 20 points so this should give the week a firm start although the drop in commodity prices and a rising Australian dollar may provide headwinds, with overall momentum still painting a bearish divergence:

European stocks finally got out of their sideways funk with the EZ wide CPI print help lifting risk assets, as the German DAX lead the way with a solid 1% finish higher for the week to 12398 points. The daily chart shows how price has been solidly supported at former trailing resistance at 12200 points and the Friday session clears the way for an attempt at besting the previous April high nearer 12500 points:

On Wall Street it was rises across the board with the PCE print helping lift consumer spending expectations and hence broader industrials, with the S&P500 finishing 0.6% higher to 2941 points. The daily S&P chart shows price had respected the low moving average at the key psychological support at 2900 points, and ready to have another go at matching the previous daily highs:

Currency markets remained quiet as traders continued to wind back positions going into the G20 meeting. The USD was mixed against the majors with the Euro absorbing the EZ wide CPI print and staying within its tight trading band. While there’s still substantial support at the 1.1330 level holding things up and momentum is negative in the short term, I’m watching the 1.1380 level for signs of a breakout:

The USDJPY pair came back slightly after its recent classic blowoff price pattern, almost hitting the 108 handle on Friday before finishing just below the dominant downtrend line. While the short term pattern is obviously bullish, the longer term downtrend plus the inevitable weekend gap will result in higher volatility to start the week:

The Australian dollar continues to push higher despite the USD strength as the 70 handle is finally breached to end the week. This move has a lot of macro analysts shaking their head, and I still contend its still ripe for a pullback and sudden inversion as this trade gets very crowded and will be confused as a new uptrend:

Oil prices pulled back even stronger on Friday, with the WTI contract flopping straight back to the $58USD per barrel level. This shows that $60 is staunch resistance with three successive daily highs unable to beat it, and while daily momentum is positive overall this commodity is still in the thrall of external events:

Finally to gold, which after a small retracement from its blowoff highs, has now stabilised to again finish at the $1409USD per ounce level again on Friday. I still contend a further retracement down to the $1400 level would give bulls more ammunition for support if its 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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