Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

No room for optimism on overseas markets last night as the lack of direction in Asia yesterday translated into mild selling on both sides of the Atlantic. Treasuries sold off slightly while gold retraced on some slightly hawkish Fed comments.

Looking at the action on Asian markets yesterday, where Chinese stocks were quite mixed with the Shanghai Composite again hovering on another scratch session, up only three points to 2883 while the Hang Seng Index was the worst in the region, down nearly 1% to 26048 points. Price had been threatening the high moving average on the daily chart, but buyers have not had the confidence to push it higher, pushing it to a four day low. I’m watching the low moving average to now come under pressure for an inversion back to the weekly lows below 25000:

Japanese share markets also put in scratch sessions to due to the rise in Yen with the Nikkei 225 closing 0.05% higher to finish at 20628 points. Futures are again suggesting another reversal given the weak moves in overseas markets, so again, we’re likely to see day traders dominate here without any direction forthcoming.  The daily chart is still showing bunching up of price between 20100 and 20700 with a series of engulfing candles, with obvious price action on either side as the main play in between the swings:

The ASX200 was the best in the region, firming 0.3% higher to just over 6501 points, helped along by a much weaker Australian dollar. SPI futures are indicating that all that will be taken back on the open this morning given the poor lead from Wall Street overnight.  The daily chart  remains weak with strong resistance at 6530 still a long way away, with the high moving average still not under any threat of a potential breakout:

European stocks were the worst movers in the last 24 hours with a huge blip higher in Pound Sterling cascading over to a lack of confidence in the FTSE and thus the continent. The German DAX finishing 0.5% lower at 11747 points, still just above recent support at the 11600 point level and holding on to this nascent recovery. I’m still wary of false moves here as momentum remains negative:

Wall Street still can’t get any traction, with only the Dow advancing while the broader bourses retreated on the hawkish comments coming out of Jackson Hole, as traders await the Fed chairs speech tonight. The S&P500 finished with a scratch session at 2923 points and while the four hourly chart is still forming a regular bullish inverse head and shoulder pattern – with the neckline at the former highs and previous daily ATR resistance at the 2940 level – this sideways action needs to firm up sooner rather than later:

Currency markets were very mixed overnight with Pound Sterling soaring on more Brexit volatility – its getting close to October 30 – while Euro just sort of flopped around and did nothing, finishing the morning again just below the 1.11 handle. I still contend 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 not followed through on its bounce back, last night falling slightly to remain in the mid 106’s but not breaking the low moving average where support lies on the four hourly chart. 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 but has now seen sellers step in, falling through to the mid 67’s and making a new intra-week low. 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 retraced slightly overnight with the WTI contract closing a few cents lower to be above the $55USD per barrel level. This keeps it well 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 remains in consolidation phase, moving a few dollars lower again overnight to be at $1498USD per ounce. I still contend we’ll see a sideways trend from here until the next Fed meeting – possibly with some moves tonight on Chair Powell’s speech, 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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