Macro Morning

By Chris Becker 

Risk markets remained unconvinced of any real development in the US/China trade war as Trump gets called out on his bald-faced lies following the G7 meeting. US stocks retreated slightly while the USD is little changed against the majors, as Treasuries firmed across the curve. The latest German GDP was left unrevised in its final reading, meaning the central European powerhouse is teetering on recession, while US consumer confidence surprised to the upside as the Case/Shiller house price index continued to lift at a steady pace.

Looking at the action on Asian markets yesterday, Chinese stocks split direction with the Shanghai Composite taking back its previous losses to close 1.3% higher and back above 2900 points while the Hang Seng Index retreated throughout the session before coming up with a scratch result to finish at 25664 points. Price action remains under a lot of pressure here, still well below the low moving average on the daily chart, and looks set to return to the terminal low just below 25000 points. Still too much for any but the swing traders to handle – the upside breakout level is still well above 21600 before re-engaging longs:

Japanese share markets advanced despite a rise in the domestic currency with the Nikkei 225 clawing back half its previous losses to close 1% higher to 20456 points. Futures are finally pointing to a staid session today after movement in Yen abated overnight. This remains a classic bearish chart pattern with a lot of volatility – expect sellers or buyers to step in sharply once there’s a clear breakdown or breakout above the obvious support and resistance levels respectively:

The ASX200 had a robust session, gaining nearly 0.5% to close at 6471 points, but still looking very weak on all timeframes.  SPI futures are indicating a mild pullback today, opening at least 10 points or so lower due to a similar move lower on 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 had a good start and kept on throughout the session, with a lower Euro helping move continental stocks along. The German DAX finishing 0.6% higher at 11730 points, still holding on above recent support at the 11600 point level but the daily chart remains in a weak pattern with price action unable to get anywhere near 12000 points as momentum remains negative:

Wall Street is switching between hope and desperation in each session with mild retracements across the board, the S&P500 finishing 0.3% lower at 2878 points with the daily chart showing a bounce off the previous terminal lows at 2825 points, but it remains a big move back to the recent highs that have since rejected long held resistance at 2940 points:

Currency markets are still providing some volatiliy with Pound Sterling surging to new weekly high on more Brexit bruhaha from Boris. Meanwhile, the union currency we all love to hate is continuing to deflate with the Euro breaking through the 1.11 handle overnight. Momentum is no longer positive and while there is a mild bullish falling wedge pattern forming on the four hourly chart the overall price pattern remains down:

The USDJPY pair finally slowed down overnight, moderating towards the high 105s yet unable to make a new session high. As I said yesterday, the previous move was far too much too fast, so a little consolidation is to be expected. Momentum remains flat lined so I’m watching the low moving average for signs of a potential breakdown:

The Australian dollar had similar intrasession volatility with a fall back to the mid 67’s as commodity prices fell back overnight. There is still a failure to breach the previous weekly high so weakness remains here, particularly on the daily charts, and with a busy economic event schedule this week, we could see a proper catalyst for a breakdown soon:

Oil prices were the standout and cameback to life overnight, with the WTI contract lifting solidly to close into the mid $55USD per barrel level. This still keeps it below the high moving average on the daily chart but it staves off concerns of a return to the previous lows – solid black horizontal line – just above $50:

Finally to gold, which is now getting a move on after a very breif consolidation, moving sharply higher to finish at $1542USD per ounce. Its time to ride this wave and keep a series of uncle points ready, perhaps the first starting at just below the $1500 handle is prudent, or lower at $1450 or so for longer term positions:

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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