Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Overnight risk markets are in retracement mode as the USD also falls against all the majors except the commodity proxies as Aussie, Kiwi and Loonie remain subdued. European stocks fell as bond yields dropped everywhere except in Italy, while oil prices are not moving as the latest inventory report surprises with a build.

Looking at the action on Asian markets yesterday where  fortunes diverged for Chinese stocks as the Shanghai Composite bounced back above 2900 points but only just, retracing slightly at the close to only be up 0.2% to 2907 points. The continued chaos in Hong Kong kept things nervous on the Hang Seng Index which fell nearly 1% to 26323 points. With price now well below trailing ATR support and the previous support/resistance zone a full retracement down to 25000 points at the intersection of the lower trendline is likely:

Japanese share markets remained in selloff mode with the Nikkei 225 closing 0.7% to 23162 points. This was due to further Yen buying throughout the session and futures are falling as Yen surges again overnight. Watch trailing ATR support which must be respected on any dip here as momentum reverses:

The ASX200 rebounded on the poor unemployment print, closing at 6735 points or 0.5% higher to get back above the very important resistance level at 6700 points.  SPI futures are up just a handful of points going into the Wall Street close, so again its looking like a stall at this juncture of price and resistance – what will it take to properly breakout?

European markets are finishing the day slightly lower with the FTSE  off the most, down 0.8% as Pound Sterling surged while the German DAX fell back 0.4% again to 13180 points, still holding above multi-month resistance at 12700 points but extending its consolidation phase with no new daily high for over a week. More retracement is warranted here as the daily chart plays catchup after being so overbought:

Going into the close, Wall Street is just holding on to minor scratch sessions, with all three major bourses down around 0.1% in a very lacklustre (read: profitless for me) session. The S&P500 is down just 2 points, remaining below the  3100 point level. The pattern on the daily chart remains toppy looking with momentum reverting sharply from overbought levels, as I remain wary about any bad news on China that could see this “everything is aweseome trend” unravel:

On currency markets, the USD was pulled back by the majors, with Pound Sterling surging while the the oversold Euro finally made a comeback to be just over the 1.10 handle this morning. The four hourly chart is showing a falling wedge here, a nice bullish pattern but nothing to get excited about until trailing ATR resistance above is taken out:

The USDJPY pair fell the most overnight, breaking right down to the 108 handle this morning in a very steep and very ominous selloff. The four hourly chart shows how fast this move is, as momentum switches into the extremely oversold condition, with a retracement back down to the previous weekly low at the 108 level proper firming:

The Australian dollar is not participating in the USD weakness with a break below the 68 handle here this morning as lower commodity prices weigh on the Pacific Peso alongside the poor unemployment print. The chance of a swing higher has disappeared, but momentum is again in extreme levels so watch for potential upside:

Oil prices just can’t build any higher with the WTI contract slipping just below the $57USD per barrel level as previous ATR resistance proves too hard. 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 successive new daily lows, has found some life here to bounce back up to the $1472USD per ounce level. Price needs to move back above the $1480 former support, now resistance level or this could prove a bull trap and send gold into a second phase selloff:

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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