Macro Morning

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Macro Afternoon

By Chris Becker 

No news means good news for risk markets with Wall Street rallying on Friday night, with currency markets stabilising although Pound Sterling got a bit excited on more hard line Brexit gyrations. The USD remains steady while safe havens like Yen and gold are also largely unchanged with only Euro dropping on Friday as bond markets also eased off.

Looking at the action on Asian markets on Friday, where the Shanghai Composite continued its little rebound to finish 0.3% or so higher to advance beyond 2800 to 2823 points while the Hang Seng Index also moved higher, up 0.9% after Thursday’s rebound to finish at 25734 points. Not quite a weekly high, but a good effort nonetheless after selling off during most of the week, with the daily chart still spelling a lot of trouble ahead if it breaks below 25000 points proper:

Japanese share markets were just hanging on as Yen buying slowed a little with the Nikkei 225 putting in a scratch session to finish at 20413 points. Futures however are suggesting a much better start this morning as Yen sold off a little on Friday, but its more about Wall Street bouncing back. The daily chart is still a classic dead cat bounce picture, but there could be life in the cat if price closes above the high moving average:

The ASX200 was the worst in the region, but only fell a handful of points to finish off a forgettable week at 6405 points, taking away the last 3 months of gains. SPI futures are up a solid 40 points however following the bounce on Wall Street overnight, so we should start the week in a much better mood today, although a stronger Aussie or any whiff of change in risk sentiment could see this wiped out:

European stocks were somewhat stable following the potential new ECB stimulus coming down the line as confidence remains fragile, the German DAX nevertheless jumped on the positive mood, closing 1.3% higher at 11562 points, almost getting back to recent support at the 11600 point level. This could turn into the next resistance level as the previous 12000 point level remains a distant memory. While Thursday’s candle is a classic bottoming pattern with its long tail on oversold momentum, there is no evidence yet of a potential bounceback – watch 11600 to 11700 as the level to leap over first:

Wall Street was even more positive with the lack of bad news helping re-engage the BTFD crowd with the three major bourses all lifting over 1% or more with tech stocks leading the way. The S&P500 finished nearly 1.5% higher at 2888 points, with 2900 points threatened on futures in what looks like the second bounce of the dead cat. Daily ATR resistance at the 2940 level needs to be cleared to call this correction off, so this remains a dangerious swing play only so far:

Currency markets turned off the safe haven buying but not the dumping of Euro with the union currency cracking through the 1.11 handle on Friday night. The four hourly chart shows the potential for further losses here down below the 1.10 area but requires a fall below the recent session lows at 1.1070 before confirming:

The USDJPY pair is steadying again, slowing rising out of its relatively tight trend channel here, after being dominated by Yen buying last week, hovering above the 106 handle. I’m watching trailing ATR support at the mid 105’s to come under pressure here again if we get another risk off event, but this has the potential for another breakout above the 106.80 level:

The Australian dollar is also on a steadying trend post-unemployment numbers from last week, hovering just below the 68 handle on Friday night in a very quiet session. I still contend theres a lot of weakness here so I’m positioning for a return to former ATR support at the 67.40 level where I expect another breakdown and back to the previous lows below the 67 handle

Oil and other commodities are also steady after a wild mid-week bid and sell with the WTI contract just below the $55USD per barrel level on Friday night. This keeps it below the high moving average on the daily chart and keeps momentum in an oversold reading, as this swing trade looks to reverse and head back down to $50:

Finally to gold, which had been benefiting from the safe haven bids has pause and maybe rolling over here to finish at the $1511USD per ounce level on Friday night, off nearly $20 from its recent high. This is the usual way an overbought asset recovers from the initial exuberance so a settling here or even a correction back to the low moving average down to $1500 would not be worrisome for gold bulls:

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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