Macro Morning

By Chris Becker 

A mixed night again on Wall Street with concern over a no-deal Brexit easing slightly as Boris finds his deadline curtailed by Parliamentary law – so now he’s going to suspend it! Pound Sterling lept higher, dragging Euro with it while the Aussie fell back slightly but remains quite strong against King Dollar. Oil prices have broken out with both Brent and WTI 2% higher for new weekly highs while other commodities cooled off, particularly gold which has cracked below $1500USD per ounce.

Looking at the action on Asian markets on Friday, where the Shanghai Composite was the best in the region, closing 0.8% higher to firmly advance above the 3000 point barrier while the Hang Seng Index fell back slightly to put in a scratch session, closing at 26681 points but remaining somewhat overbought. Note however on the daily chart that 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 did well despite a stalled Yen with the Nikkei 225 closing 0.5%  higher again to 21318 points making another new daily high.  This remains a very solid breakout following weeks of consolidation with a bottoming pattern, with price now closing above trailing ATR resistance and momentum well into the positive zone. It all depends on the positively correlated USDJPY which rose again overnight, so despite my concerns of too fast a move, we could see more upside today:

The ASX200 paused its recent solid run, putting in a scratch session to finish where it started at 6648 points despite much better housing finance figures, possibly pulled back by the ever stronger Australian dollar during the session. SPI futures are down around 10 points this morning given another mixed lead on Wall Street, so I expect the 6600 point level to continue to act as local resistance.  Price action on the daily chart indicates a firm trend is underway, but ATR reisstance overhead needs to be cleared substantially before getting back to the 6800 point highs:

European stocks were all over the place with peripheral bourses underperforming, the FTSE slumping on the solid Pound Sterling while the German DAX cruised higher to finish up 0.3% to 12226 points. The DAX daily chart continues to be very positive, with price action well above its own high moving average and now clearing ATR resistance as support at 12000 points firms, but this may just be a bounce and not sustainable:

Wall Street was again deflated by the lack of economic catalysts with only the Dow putting in a barely positive session, as the NASDAQ and S&P500 closed slightly the lower, the latter off by 1 point to 2978. While price remains well over long held former resistance at 2940 momentum is now with futures indicating a continued slow start to the week as the key 3000 point barrier remains untested :

Currency markets remains somewhat subdued following Friday’s NFP print and the lack of events on the economic calendar, although both Pound Sterling soared overnight as the prospect of a no deal Brexit diminished. This dragged Euro slightly higher to match last week’s intrasession high at nearly midway through the 1.10 handle as it remains above trailing ATR support proper on the four hourly chart. I’m still positioning for a break below ATR support as this pattern morphs into a double bearish top

The USDJPY pair accelerated higher however, finishing above the 107 handle and making a new weekly high this morning. Although momentum is considerably oversold a pullback is not yet evident as Yen sellers buy up domestic Japanese stocks instead – but I’m still watching the 107 handle closely:

The Australian dollar finally found some sense and paused overnight after almost reaching the 69 handle.   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 are finally getting a headway and its all up with both Brent and WTI contract prices lifting over 2% to finally break out of long held resistance with the latter above the $58USD per barrel for the first time since July. So here we go with this breakout where all the players will step in but how far will it be pushed? The next target level is quite close at $60:

Finally to gold, which continues to find sellers after failin to engage above the $1550USD per ounce level, currently at a smidgen below the $1500USD level as Asia kicks off.   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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