Macro Morning

By Chris Becker 

The US Federal Reserve cut interest rates as expected overnight at the FOMC meeting, but the response has been mixed across risk markets. The USD rose significantly against the majors, although gold was spared, with Treasury yields jumping across the curve. Stock markets were less fussed, with scratch sessions dominating across both sides of the Atlantic. It looks like a minor reaction here in Asia this morning on the carry through.

Looking at the action on Asian markets yesterday, where the Shanghai Composite came back from its previous slump to finish nearly 0.3% higher at 2985 points, but still below the 3000 point barrier that had recently turned into support, now resistance. The Hang Seng Index fell back, falling 0.2% to 26754 points, also remaining below weak support/former resistance at 27000 points.  Momentum is flatlining but just positive, so I’m watching the lowmoving average to come under further pressure here on the daily chart and another dip to develop:

Japanese share markets had minor losses despite a weaker Yen as trade concerns mounted, with the Nikkei 225 closing 0.2% lower to 21960 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 as the market wants to get back above 22000 points, helped along by a weaker Yen overnight:

The ASX200 remained under pressure, falling some 0.2% despite a positive start, finishing at 6681 points. SPI futures are up at around 10 points again so we might see a break back above the 6700 point level today as the Aussie dollar fell overnight. 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 remained calm overnight through the FOMC meeting with more scratch sessions the result as the Euro and Pound Sterling fellback. The German DAX barely moved, up about 0.15% to 12389 points, still calming down after a too fast reflation rally. I’m watching that low moving average area to possibly come under pressure if oil prices re-engage, but so far, its a nice pause:

Wall Street again did no better than European bourses, with the NASDAQ slipping while the S&P500 up a single point to remain above the 3000 point mark. The daily chart is a more stable price pattern than other reflated markets, but still requires a break above the former early July highs slightly above or this reflation rally is over:

It was up to currency markets to provide the volatility overnight in the wake of the Federal Reserve cut with Pound Sterling in a wild range, while Euro slumped after failing to make good on a series of lower session highs, reverting sharply back to the 1.10 handle. As I said yesterday, the pre-FOMC move looked like an oscillation to me and not a new trend so I’m watching ATR below to come under pressure:

The USDJPY pair is still cruising along with resistance at the 108.40 level fainally cleared overnight with a nice breakout. Momentum is now looking slightly overbought so there is potential for more upside here:

The Australian dollar however has fallen back to a new weekly low on the rate cut, breaking through  ATR support at the 68.30 level and about to head to the 68 handle proper as the four hourly chart develops a nice bearish rounding top pattern.  Today’s unemployment print will be crucial so I’m prepping for wide stop entries either side here::

Oil hasn’t taken off like a lot of the bears expected as supply shock concerns taper following the Saudi attacks. WTI slipped again overnight to close just above the $58USD 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 doing better than I expected given the pro-USD moves against the rest of the majors, absorbing the Fed cut fairly well to close down to the $1493USD per ounce level and just holding here above daily ATR support.  While there was hope 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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