Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Risk markets tumbled and the USD soared as data from the US suggested GDP growth is going to be softer than expected. Fourth quarter GDP is now estimated to be 1%, according to the Atlanta Fed after the Markit services PMI came in barely above expansion. Gold shattered below $1500USD, with all the undollars following in kind, but USDJPY leapt to a new weekly high as Wall Street stumbles around with scratch sessions going into the close.

Looking at the action on Asian markets yesterday, where the Shanghai Composite finally cracked the 3000 point level before retreating just before the close, finishing 0.5% higher to 2991 points. In Hong Kong, the Hang Seng Index did about the same, up 0.5% to 27683 points going into the close. Having cleared the 27000 point level and the weekly downtrend line last week, it should be sailing here but given how strong this move has been and the stumble in risk overnight, that overbought momentum reading maybe signalling downside instead:

Japanese share markets reopened from their long weekend playing catchup and then some, with the Nikkei 225 leaping nearly 2% higher to close at 23299 points. The 23000 point resistance level was brushed aside on the open and despite the Wall Street pulldown, futures are indicating another surge today, given the leap in the positively correlated USDJPY pair. However, this is starting to look quite overbought so I’m watching for a possible inversion:

The ASX200 was the wet blanket, barely eking out any gains, by closing only 0.15% higher to just below 6700 points, as traders would rather put a punt on the ponies. SPI futures are up only 15 points or so going into the Wall Street close, so combined with the fall in the Aussie dollar, the 6700 point level should again be breached in today’s session:

Despite some big falls in domestic currencies European markets crawled over the finish line with some small gains, with the  German DAX up only 0.1% to 13148 points, still holding very firm above multi-month resistance at 12700 points. Futures are indicating a minor pullback which could extend further if Wall Street continues to slip, and with momentum way overbought, I’m watching short term support at the high moving average itself:

Wall Street doesn’t like the higher USD and possible lower 4Q GDP growth, with all three major bourses currently in scratch mode, the broader S&P500 worse off but only down 0.1% or so. The four hourly chart is showing a classic blowoff pattern with a rounding top as extremely overbought momentum now receding, with a bearish rising wedge building here:

Currency markets are seeing a big inversion in USD with strength the name of the game, with Euro falling the most, taking out last week’s support at the 1.1060 level. This is quite a steep fall and should resolve in a small swing back, but has completely wiped out the breakout at the end of October:

The USDJPY pair continues to rebound the fastest, breaking right through the 109 handle and taking out a new weekly high as a result. Its plain as day that this move is far too far, too fast. It’s been a nice play but should pull back soon:

The Australian dollar had a small meltdown breaking below the 69 candle, which is not surprising given its inability to break above the previous Thursday/Friday highs. Momentum remains positive and commodity prices remain elevated so unless there’s a complete inversion in risk taking, price should hold at the 68.75 level:

Oil prices continue their big comeback with the WTI contract up around 1.5% 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 as the daily chart builds into a bullish pattern:

Finally to gold, which after a nice follow through above daily ATR support and making a new weekly high, has been slammed as USD soars against nearly everything. The shiny metal fell over $20 to be at $1482USD per ounce, breaking the $1500 level. Momentum has now switched to slightly negative with price just above daily/weekly support, so this is a key level that must hold:

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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