Macro Morning

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Macro Afternoon

By Chris Becker 

Its a night of record highs on Wall Street with both the NASDAQ and S&P500 gapping to new highs on the open, with US Treasuries selling off seeing 10 year yields almost reaching 1.8%.  In currency markets, its all about USD strength with the risk proxy USDJPY rebounding while Aussie and Kiwi are deflating alongside Euro, despite a big jump in oil prices again as speculation of more OPEC cuts is priced in.

Looking at the action on Asian markets yesterday, where the Shanghai Composite continued to build on its Friday breakout, closing some 0.6% higher to 2959 points while the Hang Seng Index soared 1.6% to close well above the 27000 points level, having cleared the weekly downtrend line on Friday. This is a very strong move, but with risk assets all aligned, watch for a continuation above the previous high reached in September at around 27400 to be breached:

Japanese share markets were closed for yet another holiday but futures for the Nikkei 225 looking very good considering the positively correlated USDJPY pair rebounded overnight. The 23000 point resistance level looks set to be broken on the open:

The ASX200 finally put on some gains, despite a trading halt in Westpac after a terrible result that dragged down the other divisions of Megabank, with commodity/material stocks filling in the gaps. SPI futures are going to boost that even further, up at least 30 points or 0.5% as Wall Street reaches another new record high, so the 6700 point level should be breached this morning:

European markets were again green across the board but this time gave the positive lead to Wall Street result, as lower Euro and Pound Sterling helped pushed everything higher. The German DAX finished up 1.3% to 13219 points, brushing aside multi-month resistance at 12700 points and looking very overbought as a result. Normally you’d see a reversion back to the high moving average but this could blowoff first:

Cash is moving swiftly into Wall Street which was firm across the board, again helped by higher oil prices and hopes of a trade deal, with the three main bourses up 0.5% going into the close. The four hourly chart of the S&P500 is showing a classic blowoff pattern with a slight rounding top and momentum way overbought, with CCI at 200. This usually translates into a reversion or a sideways move before blowing out again, so watch the low moving average at 3060 points for signs of support:

Currency markets are seeing a retreat of most undollar assets with both Pound Sterling and Euro retracing after their Friday night highs last week. Euro is back to the mid 1.11’s where it will test support at the 1.1140 level as momentum teeters on the zero level:

The USDJPY pair is rebounding the fastest, in line with the positive risk mood, getting back to the mid level of control of the last two weeks. Momentum is not yet positive with price still below trailing ATR resistance, but this swing move is turning a possible breakout:

The Australian dollar is melting a little as well, still unable to break above the Thursday/Friday highs, currently just above the 69 handle. I’m still watching the 69.30 level for an upside breakout:

Oil prices continue their big comeback with talk from the Iranian oil minister on potential OPEC cuts, with the WTI contract launching another 3% higher to sustain above the $57USD per barrel level. The daily chart shows significant resistance at the $60 level which is starting to come under stress here:

Finally to gold, which after a nice follow through above daily ATR support and making a new weekly high, is slowing down alongside other undollars, currently at $USD1509 per ounce level. Momentum remains nicely overbought but there’s still 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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