Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

The decline in European manufacturing activity and the swearing in of Trump-lite Boris Johnson as UK PM was not enough to upset risk markets with new record stock markets in the US, while iron ore and oil prices fell on supply gluts. The USD remained firm against the majors, although Pound Sterling fought back a bit, while the Aussie dollar remains under 70 cents.

Looking at the action yesterday, where Chinese stocks were positive but mixed with more action on the mainland with the Shanghai Composite closing 0.8% higher to 2923 points while the Hang Seng Index finished just 0.2% higher at 28532 points. This keeps it around the recent set of highs at 28500 as the market remains in a sideways mood here despite the lift in sentiment:

Japanese share markets had a solid day despite the strengthening Yen, with the Nikkei 225 closing 0.4% higher at 21709 points. Given the move to better risk sentiment overall, this bounce has now swung higher to match the previous set of daily highs at the 21700 point level, where I’m watching for an advance today – helped along by a weaker Yen:

The ASX200 had another very solid showing with a 0.7% gain, closing at 6776 points with the rise in bank stocks overshadowing the sharp dip in iron ore players. SPI futures are up solidly but the slump in iron ore prices could affect sentiment overall, so I’m a bit sceptical here even as momentum gets a move on with very firm support below:

European stocks were quite mixed with French and British bourses falling on the poor manufacturing data while the German DAX continued its own advance, albeit slowly with a 0.2% blip higher to 12522 points. The daily chart is looking solid here as this boost takes it almost back to the previous highs but this will require more Euro selling to be sustained:

Wall Street had an interesting session with the Dow retracing while the NASDAQ went to a record high, the broader S&P500 lifted 0.5% to build above the 3000 point barrier at 3015 points. Price has advanced firmly according to the four hourly chart, and has now broken last Friday’s session highs at the 3009 area, but is finding resistance at the former highs at the 3022 area:

Currency markets were relatively quiet overnight with Pound Sterling surging on the Johnson swearing in while the Euro remains depressed here, reflecting the mood in both the Mother Country and the continent. The union currency remains well below the 1.12 handle but unchanged since its selloff indicating a lot of pent up volatility ahead here:

The USDJPY pair also has paused its slow bounce back after breaking above overhead ATR trailing resistance remaining slightly over the 108 handle as we head into early Asian trading. 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 has paused somewhat in its own flop, inching slightly lower to the 69.80 level. Although oversold, watch early today for a speech from Lowe that could push it over, although the RBA has a habit of shooting itself in the foot in these circumstances.

Oil has retraced on a very poor inventory report with both Brent and the WTI contract falling, the latter heading back below the $56USD per barrel level, almost on its recent support low. As I said yesterday there is still a chance for a follow through below ATR daily support here, so watch the intrasession volatility:

Finally to gold, which apart from the Pound has been the only undollar to advance overnight, albeit slightly, getting back to the $USD1425 per ounce level, but not really making a new daily high.  Price action remains below that significant downtrend line from the record highs which is proving 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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