Macro Morning

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Macro Afternoon

By Chris Becker 

The USD re-asserted itself overnight as stock markets stumbled surrounding the continued lack of good news emanating from US/China trade talks, with Wall Street putting in minor losses. Oil rallied although this didn’t help commodity currencies as the Canadian Loonie dropped on domestic comments, dragging the Aussie and other proxies with it. It looks like a wobble to finish the week here in risk taking in Asia.

Looking at the action on Asian markets yesterday, where Chinese stocks struggled, although on the mainland that Yuan cut saved some ground for the Shanghai Composite which only fell 0.25% to be just above 2900 points. The Hang Seng Index fell straight out of bed to match the previous daily lows, falling 1.6% to be at 26456 points. Price is rejecting former trailing ATR support and the resistance zone at 27000 points as momentum builds to the negative side, but futures are indicating a potential halt to the selling here, so watch below the recent extreme lows at 26200 points:

Japanese share markets were again swayed by the volatility in Yen both overnight and throughout the session as the Nikkei 225 lost ground and closed 0.5% lower to 23038 points, despite a late rally in the USDJPY pair. While the medium term trend remains somewhat intact as trailing ATR support has been respected, the series of lower daily highs is still building significant selling pressure that could crack if the USD cannot make gains against Yen soon:

The ASX200 was in full selling mode, losing another 0.7% to fall to 6672 points after recently breaking the medium term trendline on the daily chart. SPI futures have filled half of that loss, currently up nearly 40 points going into the open so we could see a close above 6700 points to finish the week but overhead resistance above – the solid black horizontal line on the daily chart below – is still too strong to break through:

European markets again retreated with mild selloffs, despite lower domestic currencies with the German DAX falling some 0.2% to finish at 13137 points. The daily chart is morphing from a sideways consolidation to a dip, but still maintaining itself above multi-month resistance at 12700 points. The  low moving average had been breached but futures are indicating a small rise tonight, however I continue to watch the 13000 point level to come under stress here:

Wall Street sold off and then filled throughout the session, but still came away with some sizeable dents with the S&P500 down nearly 0.2% to just scrape in above the 3100 point level. The big break below the four hourly rising wedge pattern and through trailing ATR support has been halted with a lack of sellers pushing it below the previous weekly resistance level.  Momentum readings remain negative, but not oversold and indicative of a breakdown – yet:

On currency markets, the USD firmed against the majors once more, particularly Loonie and Euro with the latter attempting a false breakout towards the 1.11 handle before spindling back below and almost breaching trailing ATR support. Momentum has reversed swiftly, so be careful of the recent session lows at the mid 1.1050 to come under pressure

The USDJPY pair slowed in its bull trap, finding some buying support at the 108.30 level and heading back to the 108.60 level overnight. This sets up for a potential breakout above the high moving average on the four hourly chart so watch momentum readings above zero for a swing play higher to finish the week:

The Australian dollar was a casualty again overnight as USD firmed with the Pacific Peso flopping below the 68 handle and this timey breaking its very tenuous short term uptrend from the previous weekly low. Overhead ATR resistance has been rejected in full and I now expect a run back down to last weeks low at the 67.70 level:

Oil prices have filled in their reversal with a substantive rally with both Brent and WTI moving up in sync, the latter contract rising to a new monthly high above the $58USD per barrel level. The daily chart is now looking much more bullish with momentum in overbought readings and suggesting a trend back up to the $60 level:

Finally to gold, which after treading water and unable to breakout of its funk, fell victim to a stronger USD and lost nearly $10 to finish at the $1464USD per ounce level. Price needed to move back above the $1480 former support, now resistance level but now I fear a break below the low moving average and a retest of the lows below $1450 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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