Macro Morning

By Chris Becker 

Markets are being pushed around by central bank speculation and a calming of the nerves surrounding the Saudi oil supply crunch with a surprise build in oil inventory cutting the recent gap higher in half for both WTI and Brent crude prices. The USD fell back against the majors with the Euro the biggest mover, dragging the Aussie higher with it. Its a subdued mood out there with stock markets ranging from small gains to tiny scratches as we all await the FOMC meeting.

Looking at the action on Asian markets yesterday, where the Shanghai Composite slumped to finish nearly 2% lower at 2979 points, breaking below the 3000 point barrier that had been building as support while the Hang Seng Index followed in suit, closing 1.2% lower at 26790 points, just  breaking below weak support/former resistance at 27000 points.  Momentum is now flatlining but still positive, so I’m watching the high moving average to come under further pressure here on the daily chart:

Japanese share markets reopened from their long weekend in a holding pattern with the Nikkei 225 closing right on 22000 points. The daily chart still shows price action as a classic bubble like blowout which needs to be resolved in a pullback soon, but futures are indicating another small uptick today. I’m still watching the 21650 local support area to come under stress:

The ASX200 continued to make some gains in as iron ore advanced and the Australian dollar dropped on the back of the RBA minutes, climbing some 0.3% to finish at 6695 points. SPI futures are up at least 10 points so we should see a break back above the 6700 point level today. Price action on the daily chart was indicating a possible rollover but that hesitation has been pushed aside as momentum builds for another leg higher:

European stocks were relatively calm overnight with tiny scratch sessions the result as the Euro and Pound Sterling rallied alongside Treasuries as traders await the FOMC decision. The German DAX barely moved, closing right on 12372 points, continuing its pullback and calming down after a too fast relfation rally. The drop in Brent prices should be welcome news, but I’m watching that low moving average area to come under pressure:

Wall Street again did a little better than European bourses, with all three markets up 0.3% or so to take back the previous minor losses with the S&P500 closing above the 3000 point mark. This remains a much more stable price pattern, but still requires a break above the former early July highs slightly above or this reflation rally is over:

Currency markets sharply reversed their dominant USD bullish positions overnight with Pound Sterling up 100 pips, with Euro putting in a similar move, launching off support at the 1.10 handle and getting back to the Monday morning start point. This looks like an oscillation to me and not a new trend so I’m watching tonight’s open around the 1.1080 level to come under pressure:

The USDJPY pair is still cruising along with resistance at the 108.40 level tapped twice overnight with price remaining stubbornly over the 108 handle. Its a hard read from here as momentum was considerably oversold but has had the appropriate inversion and good fill so there is potential for an upside breakout, but note how medium term momentum is turning down:

The Australian dollar saw a similar bounce to the Euro/non-Europe currencies with a nice bounce off of ATR support at the 68.30 level and now up to the 68.70 level in a mild reflation. Whether this will stick going into the FOMC decision is another thing. I still contend there is a possibility of a rounding top here as consolidation could turn into inversion, so watch momentum readings and local support at that mid 68 level:

Oil oil oil! What a market! Here we see an enormous gap that was supposed to be filled now retraced almost back to the previous level, with both WTI and Brent falling sharply overnight on the oil crude inventory data and Trump putting the pistol back in the holster (hard to do with those small hands…) WTI eventually closed overnight to just below the $59USD per barrel level with volatility likely to be high for some time, and not worth touching here unless you’re a swing trader:

Finally to gold, which is trickling along without much support, still an inch above  the $1500USD level overnight with positions wound down in expectation of the FOMC meeting. While hope is building here for another leg higher, I’m not convinced and we could see more downside action to the previous resistance level at $1425 as part of a bull market dip:

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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