Macro Morning

By Chris Becker 

With US markets closed for a holiday, other risk assets still pushed higher in their absence with German bond yields now at a record low and matching the ECBs negative deposit rate. Currency markets were very stable as the lack of volume impacted movements while traders await tonight’s NFP print.

Looking at the action in Asia yesterday where the  Shanghai Composite declined slightly but managed to close just above the 3000 point barrier, still barely holding on to its early week bounce-back. The Hang Seng Index put in yet another scratch session to close slightly lower at 28795 points, still unable to make good on the previous breakout but still holding on above the previous set of highs at 28500. We need a new daily high soon or the bulls will close their positions:

Japanese share markets bounced back slightly on Governor Kuroda’s comments as the Yen was relatively stable throughout the session, with the Nikkei 225 closing 0.3% higher at 21702 points, finally making a new session high. An unmoved Yen overnight has seen futures decline slightly so we’re unlikely to see much upside today, although the potential target still the April highs near 22500 points is still in play:

The ASX200 was the standout gain by rallying another 0.5% higher to 6718 points, its first time over that level in over a decade with banks and consumer stocks leading the way. SPI futures are stable given the lack of lead from Wall Street, so the race back to the 2007 highs continues with the daily chart well supported here at the low moving average and ratcheting ATR support, although we are overdue for a retracement:

European stocks were relatively stable post the Lagarde ECB nomination and without Wall Street later in the session, mainly putting in scratch sessions. The German DAX eked out about 0.1% rise to finish at 12629 points. Momentum is still nominally overbought but waning here with a retracement back to the high moving average or the pre-breakout levels expected soon:

Wall Street was closed to watch Trump’s Parade so let’s look at the monthly chart of the S&P500 since its nadir in 2008 as futures peaked through the 3000 point level overnight:

Currency markets were even quieter with the Euro flatlinging just below the 1.13 handle. This is firming up as strong support going into tonights NFP print, but could easily flip over and head back to the April lows:

The USDJPY pair was just as quiet with very little price activity throughout the session, finishing where it started yesterday morning at the 107.80 level. Trailing support at the mid 107s could be taken out next, but momentum is not yet negative enough to warrant it:

The Australian dollar remained strong and above the 70 handle and still above previous level reached late last week. The four hourly chart still looks quite bullish, with the ATR support level providing great intra-session Uncle points to add to longs:

Oil prices are still trying in vain to comeback after the OPEC induced selloff , with the WTI contract retracing slightly to finish just below the $57USD per barrel level. It looks like staunch resistance at the $60 level remains too hard to beat and I’m watching for a follow through with another red candle close below the low moving average:

Finally to gold, which made another attempt overnight to breakout for another new daily high and beat the long running downtrend line overhead. The shiny metal eventually closed where it started at the $1415USD per ounce level, almost matching the previous high::

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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