Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

A very quiet night for stock markets as weakness in USD sees risk taking a back seat with scratch sessions on both sides of the Atlantic. The USD fell against Yen and Euro in particular, while Bitcoin reached a new monthly low by crossing below $8300.

Looking at the action on Asian markets yesterday, where Chinese stocks started the week in a much better state as the Shanghai Composite closed over 0.5% higher to 2909 points while the Hang Seng Index leapt 1% to close at 26681 points. Price is still well below previous trailing ATR support and the previous resistance zone but no new daily low in three sessions is keeping the selling at bay:

Japanese share markets also advanced with firm conviction, despite a flat Yen during the session as the Nikkei 225 closed nearly 0.5% higher to 23416 points. This was due to mainly to a cease in Yen buying throughout the session but despite the flat run on Wall Street overnight, futures are expecting a small blip on the open. So far this trend remains intact as trailing ATR support has been respected but note the series of daily highs that are falling fast:

The ASX200 was the odd one out, dropping nearly 0.5% and unable to get back above the 6800 level, despite risk-on elsewhere, closing at 6766 points. SPI futures are down nearly 10 points so its unclear if the market can beat the odds again on the open this morning and try cracking through 6800 points once more:

European markets were relatively flat with no catalysts to work off overnight, with the German DAX falling 0.25% to finish just over 13200 points. The daily chart shows a sideways consolidation here, still maintaining itself clear and well above multi-month resistance at 12700 points. The daily trend has been respected so far with the low moving average untouched since the breakout but may be touched soon:

Wall Street failed to make another new record high with the S&P500 dropping back a couple of points after looking quite overextended from Friday nights high. As I said then, I’m still cautious given the overbought status and the lack of substance behind the move, but price always wins first when trading, not your opinion – watch momentum and the low moving average to come under pressure here:

On currency markets, the USD continues to be pulled back by all the majors, especially in Europe, with Pound Sterling, Swiss France and Euro all surging against King Dollar.   The four hourly chart of Euro shows a nice continuation of the bullish falling wedge pattern as price heads back towards the 1.11 handle and well above previous trailing ATR resistance.Momentum is nicely overbought but not exceedingly so, but ratcheting up uncle points here makes sense:

The USDJPY pair had a textbook bull trap, swinging violently overnight to fall back to the mid 108s after a solid Asian session bounceback. I considered that the weight of the previous week selloff was telling here and indeed a not quite positive enough momentum reading helped avoid this bull trap as its only really a swing play before another leg down:

The Australian dollar is not yet participating in the overall USD weakness with the recent swing higher back through the 68 handle not turning into anything substantial. Price is still unable to break trailing ATR resistance at the 68.30 level so that’s where to watch from here on in:

Oil prices are slowly drudging out a small uptrend, but the WTI contract is failing to find traction again, finishing down to be just below the $57USD per barrel level after taking out the previous ATR resistance level on Friday night. The daily chart was building a series of higher session lows and lots of intrasession buying support to give this trend legs, but its losing momentum as the short term target at $60 or so remains too far away:

Finally to gold, which after breaking down previously made a minor comeback last night to finish at the $1472USD per ounce level. Price needs to swiftly 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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