Macro Morning

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MB Radio: Irresponsibility becomes the new black

By Chris Becker 

Swings and roundabouts as the risk meter returns to the positive polarity overnight, with European and US stocks lifting in response to a delay in proposed US tariffs on European autos. The USD is mixed against the majors, with Pound Sterling lifting alongside the Swiss Franc while Euro is falling as the tariff news is weighed. Gold remains under enormous pressure, so no surprise there.

Looking at the action on Asian markets yesterday where Chinese stocks tried to rally after the previous wipeout with the Shanghai Composite closing only 0.2% higher to just above 2900 points while the Hang Seng Index is bouncing back after a poor session, up 0.5% to 27045 points and staving off a new daily low. Note how price is just bouncing off of trailing ATR support which equates to the previous support/resistance zone that was cleared before this blowoff rally started:

Japanese share markets did even better however with the Nikkei 225 firming to close 0.8% higher to 23520 points. This was due to steady Yen selling throughout the session as tech stocks took charge as this trend remains quite intact and only mildly overbought. Watch trailing ATR support to be respected on any dip here to the low moving average:

The ASX200 slipped to take back half of the previous gains, down 0.3% to 6752 points, lead by WBC which dropped nearly 4% in the session, dragging the other banks with it.  SPI futures are up nearly 20 points going into the Wall Street close, so this may be filled on the open, depending on further bad news being baked in:

European markets had a solid session, with the tariff delay helping alongside lower currencies. The German DAX recovered to be up nearly 0.7% to 13283 points, holding well above multi-month resistance at 12700 points. After being considerably overbought I would consider more retracement is warranted as the daily chart remains in fine condition for an extended rally:

Wall Street is trying to remain upbeat as well with Trump’s ranting speech at the Economic Club in NY pushing stocks down from their highs, with the Dow again putting in a scratch session while the S&P500 advanced some 0.3% to 3093 points. The pattern on the four hourly chart is looking toppy again with momentum getting way overcooked and I’m still wary about any  bad news on China that could see this unravel, but the overall trend remains intact for the followers:

On currency markets, the USD was pulled somewhat in either direction, although against European currencies it gained ground against all except Pound Sterling. Euro dipped below the 1.10 handle briefly before recovering very slightly but has made a new low and is poised to break lower:

The USDJPY pair was looking good after the Asian session but has pulled back down to the 109 handle later this morning and although the four hourly and daily chart still remain positive despite the small retracement I’m watching that trendline for signs of a break:

After breaking down on Friday, the Australian dollar has continued to slide into the low 68s as weekly support floats away as the Pacific Peso looks shaky to say the least. The series of lower highs and the break of weekly support is behind this move, and therefore requires a new test and no new lows before calling this selloff finished:

Oil prices are still trying to build further but are being hindered by macro catalysts, with the WTI contract remaining around the $57USD per barrel level as price bunches around previous ATR resistance.. The daily chart is still showing higher session lows and lots of intrasession buying support as it approaches trailing ATR resistance, indicative of a breakout soon, but I still note that significant resistance at the $60 level may limit upside here:

Finally to gold, which is going to make another new daily low, currently at $1453USD per ounce and looking very weak and equally oversold. By taking out daily/weekly support the selloff could go as low as $1340, which corresponds to multi year support, but first needs to clear the $1420 zone of support from earlier in the year – I am noticing a little deceleration pattern in the price however, so we could also find some bottom pickers supporting price soon:

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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