Macro Morning

By Chris Becker 

Here comes the Fed with more punch to revive this boring party! The NY chief of the Federal Reserve, John Williams, gave a big boost to risk markets overnight by goosing the easing question, sending stocks higher and slamming the USD down against all the undollars. Gold has broken out to a new six year high while the Aussie dollar is brushing aside yesterday’s poor unemployment print to be well above 70 cents.

Looking at the action in Asia yesterday first, where the Shanghai Composite gapped lower and remained low throughout the session, closing 1% lower to 2901 points while the Hang Seng Index was also off but not as much, closing 0.5% lower to 28461 points. While this puts it lower than the previous set of highs at 28500, the daily chart still looks quite firm here with a tight support/resistance band around the recent highs and lows, so watch those extremes for breakouts:

Japanese share markets were again the worst off as the latest trade numbers saw confidence disappear with Yen shooting higher on the safe haven bid. The Nikkei 225 slumped as a result, closing 2% lower to 21046 points, wiping out all of the July gains. The positively correlated USDJPY pair took another dive overnight but futures are indicating a possible bid here because of Wall Street sentiment so perhaps a break below the 21000 point level is not yet on the cards:

The ASX200 was the relative best in the region, falling only 0.3% to close at 6649 points. SPI futures are up 15 points or 0.3%, so with the risk sentiment increase overnight we should see a firming of local shares going into the weekend with ATR trailing support at the 6500 level not likely to come under pressure:

European stocks are really feeling the heat from a renewed Brexit drive and a much higher Euro didn’t help preceedings overnight with the FTSE off another 0.6% while the German DAX fell harder again, down nearly 1% to finish at 12227 points, gapping well below the previous daily lows. The daily chart has lost the fight against a wider retracement down to ATR support at the 12200 point level and while momentum is not yet negative, unless there is a better sentiment change coming soon its not looking good:

Wall Street was able to easily rally on the Fed must ease meme, but in the end it wasn’t that great a turnaround, with the S&P500 closing some 0.3% higher to 2995 points, with a little more action on the S&P futures. This keeps it around or slightly below the 3000 point key level but luckily no new lows were made in this small and short lived dips.  I’m still watching for signs of another crumbling as the earnings seasons moves on, with the 2955 point level matching the April highs as the probable uncle point here:

Currency markets had no problem playing the Fed meme overnight and sold off the USD across the board. With the UK Parliament voting against a no deal Brexit, Pound Sterling soared back after trying to find a bottom all week.  The Euro did the same on William’s comments, lifting straight back to last week’s session highs just below the 1.13 handle. The question is is this sustainable? Momentum is not yet overbought, so there is a chance of follow through here:

The USDJPY pair fell as expected, almost hitting the 107 handle after a very small rally in the Asian session prior. With momentum never in the positive phase during this swing play and overhead ATR trailing resistance too far away to be threatened, this has been a good Yen buy so far. With the wedge low at 107.80 taken out the next stage is the June lows at 106.80:

The Australian dollar lifted on the unemployment print, matching the previous weekly highs, but soared above that level to almost reached 71 cents overnight. Nuts, but its the USD being traded here, not AUD weakness. This is well overdone and could dip back to what is now support at the 70.40 level:

Oil prices continued to fall overnight with the WTI contract closing just below the $56USD per barrel level and now below its previous daily lows in June. With the previous daily lows at $56 or so cleared there is chance for a follow through below ATR daily support here and a full retracement back to $50:

Finally to gold, which was the best benefeciary of an easing Fed, soaring out of its pennant pattern here to a new six yearly high at the $USD1446 per ounce level overnight. All too easy really – and the road is open for more upside here now:

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!

Comments

    • Golden Rain Development Pty Ltd – Is MB’s favourite property mogul involved in this one?

      • The Traveling Wilbur

        Nah, you’re mixing that up with Glorious Golden Rain Development Pty Ltd. Understandable though.

    • Ah, James Paterson. A classic example of why the Liberal primary vote is still going backward. The silly rashist readhead lady and Admiral Palmer were the reason ScoMo won a majority. Love or hate her, Pauline is connecting with voters who can swing an election. Paterson is a funny little elite kid spouting all the same neoliberal dogma that is on the nose.

      • aaahhh the pallid p1ssant Paterson, the positive proof of the invertebrate alimentary canal to queef through every cell pore of its being …check carefully under the studio lights to see the turgid pasty internal mobilisations of the excremental substances that it passes off as intellect

    • In the late 80’s when the earlier tranches of factories noticeably started going over the cliff, I was told by shop stewards that we’d bent over further & faster than every country on earth dropping our tariff dacks, partly to appease & partly to ‘lead by example’. Meanwhile every other country was dragging the chain. And then they just renamed their tariffs or found other ways to charge to ‘look’ like they were participating while our Manufacturing was sailing over a cliff – No one in power gave a flying Fvk! They’d kick up dust & shout you down just like that righteous creepy, glib sock puppet.