Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

The tweeting Twit-in-Chief put another spanner in the trader war spat between the US and China overnight with more tariff threats pushing the commodity complex over the edge, sending iron ore, oil and other hard commodities down sharply, taking stocks with them. US Treasuries rallied on the safe haven bid with the 10 year yield crashing below the 2% mark while the USD was all over the place, but commodity proxy Australian dollar hit another yearly low.

Looking at the action on Asian markets yesterday, the Shanghai Composite fell nearly 0.9% to 2908 points while the Hang Seng Index continued to buckle, now at a new monthly low to finish down 0.7% at 27565 points. This puts it well below previous ATR daily support and ready to move to its May extreme lows:

Japanese share markets were able to rise slightly while under pressure with the Nikkei 225 closing 0.1% higher to 21541 points.. Futures however are pointing to a major selloff due to the slump in the correlated USDJPY pair, so I’m watching the 21000 point level to come under threat here to underwind the last quarter of meagre gains:

The ASX200 continued its retracement after reaching a record high recently, down 0.4% to close at 6788 points, mainly due to iron ore and commodity players. SPI futures are down 15 points or nearly 0.3% with iron ore stocks likely to feel the heat today, as this move confirms my KC Signal. I’m targeting as low as 6600 points in the short term. Watch the the low moving average here and an inversion of extremely overbought momentum:

European stocks were actually positive before the tweet with most continental bourses putting on good gains towards the close, only the FTSE treading water. The German DAX advanced some 0.5% to finish at 12253 points but retreated sharply on post-close futures to make another new low. The daily chart remains very bearish here, with momentum clearly negative and key support levels taken out, with correction mode the likely outcome:

Wall Street has now had a significant one-two punch with the not-dovish Fed and the not-smart Trump hitting all three bourses the wrong way. The S&P500 was knocked back again to fall almsot 1% to 2948 points, remaining well below the key psychological support at 3000 points but also taking out medium term support at the 2960 point level (horizontal black line). I said this was looking teetering yesterday and if that major ATR support level goes tonight, its correction mode:

Currency markets were all over the place, with USD weakness and strength changing across undollars.  Pound Sterling was relatively quiet while the Euro had a blip almost back up to the 1.10 handle in the absence of further Brexit rhetoric. I’m watching for an inversion here however back to the previous lows and for the 1.10 level to come under pressure:

The USDJPY pair had the biggest reversal on USD weakness and safe haven bid with a massive nearly 200 pip move overnight! My positioning for a possible break below the low moving average level around 108.40 or so has paid off but this was unexpected! This takes the pair down to the July lows, but could break further:

Trading the Australian dollar remains too damn easy even without the Foot-in-Mouth with another break overnight into the 68 handle. Momentum remains well oversold here and while I still must consider a small fightback this trade seems crowded to go only one way:

Oil and other commodities responded in kind to the Trump trade threats with the WTI contract retracing sharply to finish at the $54.50USD per barrel level, making new weekly, monthly lows in the process and taking out all the tentative support built up in the last couple of weeks. Momentum was always weak here but this sets off the possibility of a greater selloff down to $50:

Finally to gold, which had a huge rally overnight on the Trump news but also domestic US economic events, rising in correlation with Treasury yields as the chance of more Fed cuts rose, lifting over $30 per ounce to the $USD1444 per ounce level. This is a clear bullish engulfing candle move, completely reversing the previous, albeit weak selloff on the recent Fed cut. It’s not quite the new high however but pokes above the medium term uptrend line = this is getting interesting!

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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