Macro Morning

See the latest Australian dollar analysis here:

Only the property crash can sink Australian dollar now

By Chris Becker 

An unexpectedly lower UK CPI print and continued focus on Hong Kong, combined with all eyes on the Trump impeachment inquiry is seeing risk markets on both sides of the Atlantic wobble as USD becomes mixed against the majors. Gold is making a weak comeback while oil prices are trying to build up again.

Looking at the action on Asian markets yesterday where Chinese stocks were on the back foot, with the Shanghai Composite just holding on above 2900 points, falling 0.3% going into the close. The chaos in Hong Kong is not helping traders there with the Hang Seng Index gapping down and then some, selling off most of the day to be down nearly 2% to 26572 points. Price has completely cast aside trailing ATR support and the previous support/resistance zone that was cleared before this blowoff rally started:

Japanese share markets were also in selloff mode as the prospect of a China/US trade deal stumbled with the Nikkei 225 taking back all of its previous gains to close 0.7%lower  to 23340 points. This was due to steady Yen selling throughout the session but despite this setback, the current trend remains after being mildly overbought. Watch trailing ATR support to be respected on any dip here to the low moving average:

The ASX200 also fell quickly, down 0.8% to close at just a smidgen under 6700 points and still unable to substantially clear that very important resistance level.  SPI futures are up nearly 30 points going into the Wall Street close, so some of this should be filled on the open as this trendline is also intact:

European markets had a scratch session in the main with the UK CPI undershoot weighing on the FTSE and continental stocks. The German DAX fell back 0.4% to 13230 points, still holding above multi-month resistance at 12700 points but in a consolidation phase with no new daily high for over a week. 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 the CPI print overshot slightly, mainly due to energy prices, with the Dow and S&P500 putting in scratch sessions, the latter still just below the 3100 point level. The pattern on the daily chart is looking toppy again with momentum now reverting sharply from overbought levels, as I remain wary about any  bad news on China that could see this unravel:

On currency markets, the USD was pulled in every direction, with Pound Sterling hold fast despite the lower than expected CPI print while the Euro continues to fall lower, hitting the 1.10 handle and making a new weekly low. The union currency is not yet considerably oversold and could go even lower back to the September lows below the 1.09 handle:

The USDJPY pair continued to deflate overnight, breaking below the 109 handle this morning before bouncing back slightly. The four hourly is no longer looking too positive here as momentum switches into the oversold mode as the trailing ATR support starts to waver, sending a risk off signal:

The Australian dollar may finally be getting to a bottom with price bouncing off the low 68 level after being so oversold since the start of the week. If price can hold here and then break above the high moving average at the 68.40 level then a swing higher will be underway:

Oil prices are still trying to build further with the WTI contract pushin above the $57USD per barrel level as price tries to breakout above 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:

Finally to gold, which after making a series of daily lows, has found some life here to bounce back up to the $1461USD per ounce level after being considerably oversold. Price needs to hold here because having taken out previous daily/weekly support this selloff could go as low as $1340, which corresponds to multi year support. The price deceleration I noted yesterday may turn into a swing higher, but that is dependent more on broader USD weakness:

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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