Macro Morning

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Macro Afternoon

By Chris Becker 

Stock markets are taking a hit due to a triple whammy of events overnight, namely the impeachment inquiry vote in the US Congress, the stalled trade talks with China and the disappointing inflation data coming out of the PCE print. Wall Street has lost confidence coming up to the non-farm payroll/unemployment print tonight while European stocks also fell alongside commodities like oil and proxies such as the Aussie and Kiwi. Only gold is holding on, getting back above $1500USD per ounce again.

Looking at the action on Asian markets yesterday, where the Shanghai Composite fell again as the contracting PMI print stayed off risk taking, falling nearly 0.4% lower to 2929 points, while the Hang Seng Index moved the other way, up 0.9% to be at 26890 points, staving off the stall below the previous weekly high and weekly downtrend line. Future’s are indicating a pullback however, so don’t get too excited, and continue to watch the low moving average at around 26500 points for signs of an inversion:

Japanese share markets did quite well considering the weakness in USD sending Yen higher with the Nikkei 225 closing up 0.4%, taking back the previous gains to 22927 points.  Futures are not looking pretty given the big selloff in the USDJPY pair so I expect an even further pullback this morning, possibly back to the previous resistance level at 22000 points:

The ASX200 continued to suffer, down 0.4% to close at 6663 points, after recently breaking below the 6700 point barrier, mainly due to the sharp rise in the Aussie dollar.  SPI futures are down at least 25 points or nearly 0.5% as Wall Street stumbles, so this could translate into a further inversion well below the low moving average:

European markets were dragged down by the FTSE which lost over 1% as more Brexit volatility is baked in, meanwhile the German DAX dropped 0.4% to finish at 12866 points. The multi-month resistance area at 12700 points remains firm support, but momentum is starting to wane here so watch the low moving average for signs of profit taking:

Wall Street is down nearly 1% with a few hours to go, with the NASDAQ actually the strongest while the industrial heavy S&P500 the weakest in the wkae of the PCE print. While support at the 3000 point mark remains firm, the four hourly chart clearly shows price anchoring back towards the multi week resistance level as the recently way overbought price action is now morphing into a proper pullback:

Currency markets had a two phased session overnight, with USD at first weakening but then coming back strongly on the PCE data against commodity proxies at least, plus Swiss Franc. Euro was pulled back from its recent nearly new weekly high but has stabilised at the mid 1.11 handle here, just pausing to take a little heat out of its recent run:

The USDJPY pair however is in near free fall, illustrating the risk off mood with a large selloff straight down to the 108 handle after a recent spike through the 109 level.  Local support at the trailing ATR level was completely taken out, showing that risk taking is taking a back seat for now:

The Australian dollar was flummoxed at the 69.30 level with a reversal back below the 69 handle overnight, following the selloff in commodities. Momentum was too far overbought and ready to breakdown, so watch for a further break below the low moving average at the 68.50 level:

Oil prices continue to drop off following the big draw in inventories with the WTI contract just holding above the $54USD per barrel level going into the close. 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, with the potential to break down to $51 or so:

Finally to gold, which is experiencing another bounce off daily ATR support and has breached $USD1500 per ounce again but can it find further buying support or remain anchored here. Key support at or about the $1480 level must hold here, and does provide a nice uncle point to try another long go:

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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