Macro Morning

By Chris Becker 

Its all about Brexit – no trouble – overnight with risk markets tentatively moving forward, only Pound Sterling suffering any stress due to Boris’ suspension of Parliament. The USD rose slightly while Treasury yields were relatively stable through a large auction, with the latest DOE oil inventory figures giving oil prices a boost.

Looking at the action on Asian markets yesterday, where Chinese stocks diverged from the rest of the region with the Shanghai Composite falling 0.3% to be back below 2900 points at 2893 while the Hang Seng Index continued its mild retreat, down 0.2% to 25615 points. Price remains under pressure below the low moving average on the daily chart, and still looks set to return to the terminal low just below 25000 points:

Japanese share markets moved slightly higher, only just, as the Yen remained steady throughout the session with the Nikkei 225 closing only 0.1% higher to 20479 points. Futures are pointing to a good start to the session today after Yen slipped overnight. This still 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 was the best in the region, despite some big headline earnings misses – particularly Virgin – gaining over 0.4% to close at 6500 points even.  SPI futures are indicating another mild pullback today, opening around 10 points lower despite the cautious mood on Wall Street overnight.  The daily chart  remains weak with strong resistance at 6530 still a long way away, but the high moving average is beginning to waver and possibly setting up for a swing play as momentum picks up above the oversold reading:

European stocks were all over the place with the UK shenanigans, the FTSE actually finishing higher as Pound Sterling fell while the rest of the continent shook its collective head. The German DAX finished 0.25% lower at 11701 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 was much more hopeful than the Old World, with all three bourses putting on solid gains, the S&P500 finishing 0.6% higher at 2887 points. The four hourly chart is showing a build up of buying support that is now threatening short term resistance at the 2900 point level (solid red line) but this is likely just a swing back up to continually  rejected long held resistance at 2940 points:

Currency markets are drawing down in volatility – Pound Sterling excepted – with the Euro again deflating and remaining below the 1.11 handle overnight. Momentum is indicating a possible bottoming out at ATR trailing support on the four hourly chart at the 1.1060 level as the bullish falling wedge pattern resolves into nothing of the sort! The overall longer term price pattern remains down:

The USDJPY pair finally showed some life overnight, breaking out and piercing through the 106 handle but no new intra-week high. Momentum is still suspect so I’m still watching the low moving average for signs of a potential breakdown:

The Australian dollar is slowly accelerating in its own selloff, almost back to the Monday morning gap open level and not looking healthy here at all. There is still a failure to breach the previous weekly high so internal weakness indicates a breakdown soon:

Oil prices lifted on the DOE oil inventory print with both Brent and WTI up 1.5% or so with the latter contract closing just below the $56USD 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 came back ever so slightly after its early week breakout, slipping down to the $1538USD per ounce level. It continues to be a nice ride with only some hesitation along the way, so 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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