Macro Morning

By Chris Becker 

A mixed Friday on Wall Street with concern over a slightly disappointing US employment print sending stocks to scratch finishes, while interest rates the USD finished lower, although gold dropped against USD as well. European bourses did better, but not by much so its a case of caution through the weekend to this morning’s open here in Asia.

Looking at the action on Asian markets on Friday, where the Shanghai Composite put in a late session rally to finish nearly 0.5% higher, but still closing the week just shy of the 3000 point barrier. The Hang Seng Index also lifted a solid 0.5% to rise to 26660 points to claw back the previous losses, solidifying its breakout above the high moving average. Note however on the daily chart htat momentum is not yet positive, with price still below trailing ATR resistance at the 27000 point barrier – the bottom is not yet confirmed:

Japanese share markets were up a similar amount as Yen continued to sell through the session with the Nikkei 225 closing 0.5% higher at 21199 points, making another new daily high. This is a very solid breakout following weeks of consolidation with a bottoming pattern, price now above trailing ATR resistance and momentum well into the positive zone. It all depends on USDJPY however and a slightly weaker USD on Friday night may take some wind out of the market on the open today. I’m also concerned its a little too far, too fast with a pullback to the high moving average around 21000 points likely soon:

The ASX200 also continued its own solid run, closing 0.5% higher at 6647 points despite a stronger Australian dollar and the overall macro conditions. SPI futures are down around 7 points this morning given the mixed lead on Wall Street, so I expect the 6600 point level to act as local resistance for today’s session at least.  Price action on the daily chart indicates a firm trend is underway, but ATR reisstance overhead needs to be cleared before getting back to the 6800 point highs:

European stocks took the solid mood in Asia and ran with it, only running out of puff once the NFP print was at hand and US stocks stalled. The German DAX finished 0.5% higher to 12191 points, but was the best performer by far and not giving a total picture of continental moves because despite weaker domestic currencies – especially Euro – the Eurostoxx only finished 0.3% higher and is looking weak. The DAX daily chart is more positive, but maybe getting ahead of itself after clearing 12000 points and being stalled for so long:

Wall Street was somewhat deflated by the disappointing NFP print with the Dow the biggest mover, up 0.25% while the NASDAQ slipped and the S&P500 closed only a handful of points higher at at 2978. This keeps its well over long held former resistance at 2940 but momentum is waning now with futures indicating a slow start to the week tonight, so former resistance maybe tested as support as the week goes on:

Volatility on currency markets is abating somewhat, despite the NFP print usually fouling things up, with both Pound Sterling and Euro climbing back against USD to basically finish the week at the Thursday lows. The latter was pushed down to but not through the 1.10 handle and remains above trailing ATR support proper on the four hourly chart. This is starting to look like a rollover from last week’s snap rally so I’m positioning for a break below ATR support:

The USDJPY pair also fell back post the NFP print, finishing just below the 107 handle after recently getting above previous resistance at the mid 106’s. As I said last week, momentum is considerably oversold so I would not be surprised if we see some consolidation and a pullback to the low moving average or even previous resistance (solid black line)

The Australian dollar was not stopping however with its big post RBA uptrend still pushing out above the 68 handle before some mild selling pressure post NFP to see it finish just below the mid 68 level.  I said previously that this could run out of steam very quickly if risk goes off, so I’m watching for an inversion or consolidation next as momentum is way overbought:

Oil prices continue to enjoy a lot of volatility with both Brent and WTI contract prices again lifting but failing to break out of long held resistance with the latter finishing below the $57USD per barrel level on Friday. Best way to play oil remains large breakouts or breakdowns – and that means a close, not just a feint – so all eyes are on resistance here at $57.50 or so as momentum picks up:

Finally to gold, which sold off swiftly following the NFP print, heading below the low moving average for the first time for many weeks on the daily chart, closing at the $1506USD per ounce level on Friday. I keep saying you should always expect these retracements and dips as normal in a rally, with the previous small dip in momentum (note the lower readings below 100) indicating there is consolidation ahead, even to below $1500:

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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