Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

News of a delay in a potential US/China trade deal is causing Wall Street to wobble again as a quiet session without any other catalysts apart from a spike in oil inventories keep risk taking low. European markets advanced slightly on a slight tickup in service PMIs, while gold and oil remained steady as USD remains strong against the major currencies.

Looking at the action on Asian markets yesterday, where in mainland China the Shanghai Composite closed 0.4% lower to 2976 points, unable to gain any traction as it fails to maintain itself over 3000 points. Meanwhile the Hang Seng Index put in a scratch session, barely closing 0.1% higher to 27688 points after recently clearing the 27000 point level and the weekly downtrend line.  The trend still looks strong here, but maybe not sustainable as momentum remains extremely overbought:

Japanese share markets also abated somewhat following the big surge previously with the Nikkei 225 closing only 0.2% higher at 23303 points. Another market that is quite overbought and with a relatively staid night in the USDJPY pair futures are indicating a flat open this morning, so watch price to slightly retrace and get on a better trendline:

The ASX200 was the worst in the region, falling a solid 0.5% in the risk off mood to be at 6660 points, despite a lower Aussie dollar in the previous session. SPI futures are looking to fill that selloff and are currently up nearly 30 points but I’m wary of a mixed Wall Street close. Watch the uptrend line on the daily chart closely as momentum slowly moves to the negative side:

European markets were mainly in the green although some peripheral bourses slipped going into the close as Wall Street stumbled. The German DAX was the best, up 0.25% to 13179 points, still holding very firm above multi-month resistance at 12700 points. Futures are indicating further gains despite the slip on Wall Street, and with momentum way overbought, I’m watching short term support at the high moving average itself:

Wall Street is stumbling around with the NASDAQ dragging the worst as trade concerns outweigh earnings, with a flat oil price also weighing on risk sentiment. The S&P500 is currently down nearly 0.25% to 3067 points. Note how price remains stuck between the high and low moving average levels on the four hourly chart where the pattern remains a classic blowoff pattern with a rounding top as extremely overbought momentum now receding:

Currency markets are continuing to display strength in USD with Euro threatening to break below the previous session lows at last week’s support at the 1.1060 level. This remains an ominous and  steep fall with the oversold swing already done and dusted, so watched for the extreme lows to be tested soon:

The USDJPY pair pulled back from its extreme overbought status as expected, and is now looking to retest the 109 handle after previously taking out a new weekly high. This is a great reflation trade but price needs to get a move on and continue to make another new high or Yen buyers will step in if risk sentiment turns further sour:

The Australian dollar is just hanging on, swinging through the 69 candle as it oscillates as a risk proxy against stocks and commodity fluctuations.  Although momentum remains positive there is a divergence occurring here with medium term readings indicating an inversion is imminent. Watch daily/weekly support at the 68.75 level:

Oil prices are trying to build from here but another larger than expected inventory report is keeping speculative long positions contained. The WTI contract remains slightly above the $57USD per barrel level but is not making a new daily high. The daily chart shows significant resistance at the $60 level which is starting to come under stress here, but I remain unconvinced:

Finally to gold, which is just hanging on after a poor London session saw it pushed back down to daily ATR support as a strong USD continues to weigh. Still well below the $1500USD per ounce level, momentum remains in a broadly negative shape as price hovers just above daily/weekly support, which 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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