Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

US stocks lost ground as Trump fumbled around comments regarding Chinese tariffs, pushing industrials down while tech stocks had a slight tick upwards, as the USD lost ground against the undollars. Pound Sterling was the exception as the Tories continue to par back in the polls while Bitcoin cracked below the $8000 level.

Looking at the action on Asian markets yesterday, where Chinese stocks continued their bounceback, as the Shanghai Composite closed nearly 0.9% higher to 2934 points while the Hang Seng Index again surged, this time up nearly 1.5% to close at 27075 points. Price is now well above previous trailing ATR support and the resistance zone at 27000 points in a sign that not all is lost in the once peaceful territory, but I’d wait for a clear close above the high moving average before calling this dip over:

Japanese share markets were unable to advance due to a stronger Yen throughout the session as the Nikkei 225 closed nearly 0.5% lower to 23292 points. While the medium term trend remains intact as trailing ATR support has been respected, the series of lower daily highs is building selling pressure that could crack if the USD cannot make gains against Yen soon:

The ASX200 was able to make some gains however, in line with Chinese stocks, surging nearly 0.7% and this time able to close above the 6800 level. This will be short lived however, as SPI futures are down over 40 points so it looks like its still a bridge too far. However, as long as the low moving average is not breached the medium term trend should hold:

European markets were again quite flat with no catalysts, with the German DAX lifting only 0.1% higher to finish at 13221 points. The daily chart still shows a sideways consolidation here, still maintaining itself above multi-month resistance at 12700 points. The daily trend has been respected so far with the low moving average untouched but watch the 13000 point level to come under stress here:

Wall Street again failed to make another new record high with the S&P500 dropping back a couple of points with a significant break below the four hourly rising wedge pattern as seen below. Caution still reigns here given the previous overbought status and the lack of substance behind this current move, so I’m continuing to watch momentum and the low moving average to come under pressure here:

On currency markets, the USD is still being pulled back by most the majors, with the Canadian Loonie surging the most on a BOC speech that is making waves. The Swiss Franc and Euro also lifted slightly, the latter almost making a new daily high and ready to head to the 1.11 handle. Momentum is nicely overbought but not exceedingly so, but ratcheting up uncle points here makes sense:

The USDJPY pair remains in a textbook bull trap, swinging back down again later in the session and almost making a new daily low as USD weakness and risk-off Yen buying steps up. The break below the low moving average is telling here with a new break below the oversold momentum line and a possible return to the 108.30 level:

The Australian dollar is finally participating in the overall USD weakness with a swing higher back through the 68 handle now turning into something substantial as price is now threatening to break trailing ATR resistance at the 68.30 level so that’s where to watch from here on in:

Oil prices are reversing here after slowly drudging out a small uptrend, with the WTI contract falling sharply to be just below the $56USD per barrel level. The daily chart was building a series of higher session lows and lots of intrasession buying support to give this trend legs, but the losing momentum and the inability to get to the short term target at $60 or so suggests a possible return to the low $52-53 level:

Finally to gold, which after breaking down previously made is still trying to make a minor comeback and last night finished only slightly higher at just below the $1473USD 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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