Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Quite a mixed night on overseas risk markets with European bourses slipping into the red while Wall Street is just holding on as tech stocks sell off slightly amid worse than expected corporate results. Bond yields have fallen across the curve but also across all sovereign releases with the Australian dollar the strongest currency as Euro and Swiss Franc fall off the boil and Pound Sterling has another night of high volatility as a new UK election looms.

Looking at the action on Asian markets yesterday, where the Shanghai Composite pulled back all of its previous gains to close nearly 0.9% lower at 2954 points, as the 3000 point level remains a staunch barrier to break through. In Hong Kong, the Hang Seng Index has also proven unsteady with a pullback of 0.4% to close at 26779 points, remaining just above the weekly downtrend line. This doesn’t close out the recent breakout with support and momentum still supporting a short term move, but watch the low moving average at around 26500 points for signs of an inversion:

Japanese share markets were the standout, with the Nikkei 225 closing 0.4% higher to 22974 points despite Yen strengthening a little throughout the Asian session.  Futures are suggesting another higher push this morning as support continues to grow beyond the former resistance level at 22400 points, but keep watching the variations in USDJPY for signs risk sentiment has actually firmed:

The ASX200 put in another scratch session despite a strong open, closing 5 points higher at 6745 points.  SPI futures are down at least 15 points as Wall Street stumbles, so this should translate into a pullback from the recent weekly high and keeping the medium term target at 6800 points out of reach for now:

European markets did fairly well considering the surge in both Pound Sterling and Euro but it was minor scratch sessions across most of the continent with the German DAX basically finishing where it started with a minor retreat in futures alongside Wall Street. The multi-month resistance area at 12700 points continues to build as firm support, with last week’s price action and solid momentum pointing to a confirmed new breakout despite the Brexit shenanigans:

Wall Street is mixed across the board, with the NASDAQ down at least 0.3% while the S&P500 is up only a handful of points, still leaving firm resistance at the 3000 point mark behind, currently at 3044 points going into the close.  The four hourly chart shows price clearing the multi week resistance level and still overbought but watch the momentum readings carefully for signs of a pullback:

Currency markets continue to lift in volatility, lead by Euro which fell immedatiely on the London open before a big recovery saw it breach the 1.11 handle and almost beat the Friday high.  While rolling ATR support remains breached, momentum is picking up here for another attack on the downtrend line at the 1.1120 level:

The USDJPY pair conversely fell on the open as USD weakness started to bake in through the session, but has recovered somewhat this morning, currently just below the 109 handle.  Local support at the trailing ATR level at the 108 handle continues to build in the medium term as the session low shows with momentum remaining jsut overbought and holding on:

The Australian dollar is not reflecting the risk mood, with a continued bounce from the Monday morning open off the 68 handle despite lower commodity prices with a move almost through the 69 handle overnight. This does not yet take it through trailing ATR resistance nor last week’s session high, but momentum has switched to the positive side and broader USD weakness should see more movement todaY:

Oil prices dropped with both Brent and WTI losing nearly 2% with the latter contract falling well back below the $56USD per barrel level before a fill later in the session. The daily chart had been building a series of higher daily low’s, but significant resistance at the $60 level continues to hold it back:

Finally to gold, which after recently bouncing off daily ATR support and breaching $USD1500 per ounce has again failed to find any buying support and head back to a new daily low at the $1488 level. Key support at or about the $1480 level must hold here, as the false breakout seems confirmed:

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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