Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Friday night saw a continuation of some positive sentiment across risk markets, although the long weekend in the US meant positions on Wall Street were tapered back, not helped by the latest consumer sentiment figures which are receding. The ECB contineus to send out mixed messages, with some calling for more easing messages, as retail sales in Germany fell again, stoking fears – along with the upcoming hard Brexit – of a recession building across the continent. The USD was much stronger against Euro as a result, with Pound Sterling also dragged down

Looking at the action on Asian markets Friday, where Chinese stocks looked to be moving slightly higher but finished with minor losses, the Shanghai Composite down 0.1% to remain below the 2900 point level while the Hang Seng Index finished with a scratch session at 25724 points. Price remains under pressure here below the high moving average on the daily chart, and is still anchored nearer the terminal low just below 25000 points. This was looking to be the start of a swing rally higher, but there’s not enough buying support:

Japanese share markets did their best as Yen sold off during the session, with the Nikkei 225 closing up 1.1% to 20704 points. Futures are pointing to a modest start to the week today as Yen surged against USD on early morning trade. Indicative price remains stuck at or near the previous highs at just below 20700 which if finally broken could see a surge of buying as this pattern as wiped out most of the position players:

The ASX200 was the best in the region, closing 1.6% higher at 6611 points, helped by the still falling Australian dollar. SPI futures were looking good this morning but are falling back, given the lack of a strong lead from Wall Street (long weekend holiday) and a pullback in sentiment over the weekend as the Chinese tariffs go ahead.  The daily chart is still morphing into a cup type bullish pattern, so watch for resistance at 6530 to be taken out as the first step to getting a handle pattern back up to the 6640 level:

European stocks had a really good finish to the week, helped significantly by a much lower Euro, with all continental stocks and the FTSE rising. The German DAX finished 0.8% higher at 11938 points, remaining well above recent support at the 11600 point level and turning the daily chart into a more bullish pattern, albeit still below 12000 points. I’m watching momentum readings to become positive soon and a break above 12000 points before calling this dip over:

Wall Street however couldn’t sustain any gains with all three bourses putting in scratch sessions to  finish the week on a mild note, the S&P500 up only 1 point to 2926. The daily chart shows a lot of hesitation to get back above long held resistance at 2940 points which will be the telling crunch point here to call this dip over. Momentum remains in negative territory so it’s not yet all in:

Currency traders (read me, love sleep too, but you can’t have both!) are loving the volatility around Euro with yet another breakdown, this time a swift move below the 1.10 handle on Friday night to a new monthly low. Momentum is definitely against the union currency as we head full on into Brexit with the overall longer term price pattern remains down. Short term I expect a small bounce as this is way oversold:

The USDJPY pair was unable to continue its recent breakout, finding more selling pressure up near last week’s terminal highs at the mid 106’s. I keep reminding that this pair is acting completely on speculation that the US/China trade war will find an armistice soon – be careful of false wishes and keep your risk management tools at the ready with a gap down this morning likely to accelerate to ATR support:

The Australian dollar tried to push higher again and got a little bit of traction, hitting the 67.40 level before sellers stepped in once more, bringing it back to the previous Monday morning gap open level. The Pacific Peso is not looking healthy here at all as the failure to breach the previous weekly high so internal weakness indicates a breakdown soon:

Oil prices retraced with both Brent and WTI off by 1% or so with the latter contract closing below the $55USD per barrel level after failing all week to get above the previous daily highs. This puts it back down to the low moving average on the daily chart, negating any chance of a potential breakout above trailing ATR resistance at the $57 level:

Finally to gold, which is continuing its rollover pattern, finishing the week at the $1530USD per ounce level in a nice calm little retracement to take the heat out of the market.  While this continues to be a nice ride with only some hesitation along the way, I continue to caution to keep a series of uncle points ready, perhaps the first starting at just below the $1500 handle is prudent, because dips and consolidation periods are not unusual at all:

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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