Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Some more stability or instability depending on your point of view returned to equity markets overnight with the Fed minutes absorbed without much fuss as no bad macro news equating to higher risk sentiment. Weekly oil inventories were much less than expected, sending Brent higher while WTI crude was stable, as safe haven bids were steady. Gold and Yen buying has abated, but not yet abandoned.

Looking at the action on Asian markets yesterday, where Chinese stocks were able to avoid the selloffs across the region, with the Shanghai Composite putting in a scratch session to be unchanged at 2880 points while the Hang Seng Index advanced slightly, up 0.15% to close at 26270 points. Yesterday’s price action was unable to get above the previous bounce point or the high moving average but things are looking up this morning with indications of a potential breakout above 26300 points:

Japanese share markets were off due to the poor risk sentiment despite a late selloff in Yen with the Nikkei 225 closing 0.3% lower to finish at 20618 points. Futures however are suggesting another big inversion today with the daily chart still showing bunching up of price between 20100 and 20700 with a series of engulfing candles. Not the kind of volatility conducive to position trading, but good for swings until we see a breakout above 20700 or so:

The ASX200 gave back more than half of its recent gains and was the worst in the region by far yesterday closing 1% lower at 6483 points. Things might be looking up however with SPI futures up around 30 points after the bounceback on overseas markets overnight. The daily chart however remains weak with strong resistance at 6530 still a long way away, but watch the high moving average for signs of a potential breakout:

European stocks were the highlight overnight with surges across the board, the German DAX finishing 1.3% higher at 11802 points, closing well above recent support at the 11600 point level. While this is a solid close above the high moving average band it still hasn’t broken the previous false bounce point from early August – so be wary of false moves:

Wall Street finally got some traction, with the BTFD crowd helped along by regular buyers to see all three bourses pushed higher. The S&P500 took back its recent gains and then a little more, closing 0.8% higher at 2924 points. Note how the four hourly chart is forming a regular bullish inverse head and shoulder pattern with the neckline at the ormer highs and previous daily ATR resistance at the 2940 level which needs to be cleared to call this correction over:

Currency markets were not very energetic overnight with Pound Sterling again retracing its recent gains while Euro flopped late in the session to finish just below the 1.11 handle again. I’ve been saying that this is not yet a bottom as session highs are still nowhere near the recent bottom high with the four hourly chart showing the potential for further losses here down below the 1.10 area:

The USDJPY pair has bounced back from its recent roll over, inline with improved risk sentiment to get back above the mid 106’s but not breaking above the Monday session highs. This still has the potential to fall back to trailing ATR support at the high 105’s but momentum remains positive on the shorter timeframes:

The Australian dollar had been relatively steady through this tentative risk on comeback but last night a false breakout saw the Pacific Peso lift up to the 68 handle before heading back down to remain steady at the 67.80 level. As I said previously, I still contend there’s 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 prices were volatile again around the IEA inventory reports but basically finished where they started with WTI closing just below the $56USD per barrel level overnight. This pulls it back below the high moving average on the daily chart as momentum still remains negative and not supportive of a trend here until overhead ATR resistance at $57.50 is taken out:

Finally to gold, which is still in consolidation phase, moving a few dollars low overnight to be at $1502USD per ounce. I still contend we’ll see a sideways trend from here until the next Fed meeting, but watch the low moving average area for signs of any sellers stepping in:

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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