Macro Morning

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Macro Afternoon

By Chris Becker 

The risk tone for the next month was set high and positive on Friday night as the latest US jobs report – the non-farm payrolls or NFP – beat expectations and previous prints were revised higher. This was offset by a disappotining manufacturing PMI print but nonetheless, US Treasury yields jumped alongside stocks with Wall Street closing nearly 1% higher across the board to new record highs. Currency and other undollars reacted in kind, with gold and oil leaping higher while the Aussie rebounded alongside. This should make a very positive open here to start the week in Asia this morning.

Looking at the action on Asian markets on Friday, where the Shanghai Composite found some ground finally, closing almost 1% higher to 2958 points after a volatile week while the Hang Seng Index closed 0.7% higher at 27100 points making for a solid breakout above the weekly downtrend line. Futures are indicating a followthrough today, so watch the previous high reached in September at ca. 27400 to be breached:

Japanese share markets fell back but not as much as expected given the big selloff in USD against Yen in the previous session, with the Nikkei 225 putting in a mild scratch session to finish down 0.3% to 22850 points.  Futures are looking a lot better given the rebound in the USDJPY pair in the wake of the solid US jobs report, with the daily chart still showing nicely overbought momentum, so expect the previous daily high to be matched or even beat today at 22950 points or so:

The ASX200 barely eked out a positive session, up only 0.1% to write off a bad week, closing below the 6700 point barrier again. SPI futures however are up at least 25 points or nearly 0.5% as Wall Street reaches as new record high, so this should translate into a nice bounce to start the week and attempt to get back to the former highs just above 6700 points:

European markets were green across the board and dragged higher by the positive Wall Street result, brushing aside the dampening Brexit volatility. The German DAX finished 0.7% higher at 12961 points, remaining firmly above the multi-month resistance area at 12700 points which is very solid support going forward as momentum picks up again for another leg in this rally:

Wall Street was firm across the board, helped by higher oil prices, with the NASDAQ the strongest up 1.1% while the industrial heavy S&P500 making a new record high to be up 0.9% to 3066 points. Support at the 3020 point mark is building, as is momentum which is now definitely overbought as the price pattern is ready to push the market much higher:

Currency markets had a sharp reaction to the US NFP print on Friday night, with USD strength then overshadowed by a rebound in undollars with both Pound Sterling and Euro pushing higher, although the former was a little meek and couldn’t  beat its two week high above the 1.30 level. Euro also was unable to get back to its recent highs nearer the 1.12 handle but tried enough to warrant a re-engagement, so I’m watching the relatively wide moving average channel for signs of building support at the 1.1140 level:

The USDJPY pair was able to find some buyers following its recent near free fall, illustrating the switch to a risk on mood with a bounce back through the 108 handle. This should get higher this morning on the Monday morning gap start as Japanese traders press the Yen sell button and buy Nikkei – but its a swing play only at the moment as momentum remains largely oversold:

The Australian dollar had a similar pattern to Euro on Friday nigh but with a much easier support level to discern at the 68.80 zone, but it too failed to beat its intra week high, remaining just above the 69 handle. Like USDJPY, the weekend gap start should see a solid bid here on risk taking, so watch the 69.30 level for an upside breakout:

Oil prices saw a big comeback in the wake of the US prints, with the WTI contract launching over 4% higher to just above the $56USD per barrel level. The daily chart has been building a series of higher daily low’s and testing support at the $53 to 54 zone, but significant resistance at the $60 level is the level to truly beat here:

Finally to gold, which followed through on its recent bounce off daily ATR support at $1480USD per ounce with a new daily and weekly high, finishing at the $USD1514 per ounce level. This is a good start but note that price action on the upside is weighed here with resistance just overhead at $1520 that needs to be cleared first:

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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