Macro Morning

By Chris Becker 

European markets awaited the outcome of the UK Tory leadership and hence new PM outcome with the Euro tanking on the news that “Trump-lite” Johnson got the job, thus securing months of chaos until the end of October. This was overshadowed by positive news around the US-China trade war plus a new deal to raise the debt ceiling by the US Congress. Home sales data from the US was disappointing but that didn’t stop stocks climbing again and it should be a positive mood here in Asia today.

Looking at the action yesterday, where Chinese stocks have come back slightly with the Shanghai Composite lifting 0.4% to exactly 2900 points while the Hang Seng Index is up around 0.3% to 28446 points. This still keeps it just below the recent set of highs at 28500 as the market continues to track sideways here. The recent US/China trade news might give it a push higher in today’s session and momentum is still nominally positive:

Japanese share markets were the drawcard due to a much weaker Yen but also some mergers and tech stock gains, with the Nikkei 225 rising nearly 1% to close at 21620 points. I’m no longer positioning here for a possible break below the 21000 point level, given the solid move to better sentiment with this bounce having the potential to turn into a swing higher above the previous set of daily highs at the 21700 point level:

The ASX200 had a solid showing with a 0.5% gain, closing back above 6700 points again at 6725. SPI futures are up at least 30 points or over 0.5%, so its going to be another record day it looks like again with the overall trend and the positive lead from Wall Street overnight. Momentum is really picking up again and support at the 6570 level remains very firm:

European stocks broke out of their stupor as the Euro tumbled with the German DAX having the biggest push to finish more than 1.6% higher at 12490 points. The daily chart is no longer looking anemic with this boost almost back to the previous highs but can it be sustained by just lower currency moves?

Wall Street was much more positive as well despite the poor domestic data with all three bourses advancing. The S&P500 lifted 0.7% to get back above the 3000 point barrier at 3005 points. Price has advanced firmly according to the four hourly chart, and although it hasn’t broken the Friday session highs at the 3009 area, its broken the treadline from the series of lower highs since the recent record high so there is hope here:

Currency markets saw a lot of action overnight with the USD firming strongly against Euro and a little vs Pound Sterling on the Johnson vote. The Euro was pushed right through the 1.12 handle and slumped down to the mid 1.11’s in a beautiful swan dive, indicating there’s a lot of volatility ahead here. This is way oversold in the short term howeveR:

The USDJPY pair continues its slow bounce back by breaking above overhead ATR trailing resistance which had proven too hard to beat last week, finishing this morning just over the 108 handle. If momentum continues to remain in this overbought stage it might mean more repositioning and a move back to the early July highs instead of the June lows that I’ve been targeting:

The Australian dollar flopped as well, finally getting through the recent ATR support level at the 70.20 area and is barely holding on to the 70 handle going into the Sydney open this morning. This dip is almost over, but I’m wondering if there’s more positioning ahead before the FOMCmeeting so I’m watching the session lows here for another possible follow through:

Oil prices have finally put some runs on the board with a little rally overnight as the WTI contract lifted over a dollar to close just above the $57USD per barrel level, building on its recent support low. There is still a chance for a follow through below ATR daily support here but the daily chart is firming with positive momentum and another throw at the recent highs above the $60 level:

Finally to gold, which is barely holding on to its recent kickback to finish lower again this time back to the $USD1417 per ounce level. The bearish engulfing candle and price action remaining below that significant downtrend line from the record highs is heady resistance here for more bulls to climb back in, so I’m watching sentiment swings on the lower timeframes to discern direction:

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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