Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

US all the way on Friday night with Treasuries, the USD Index and Wall Street all advancing in tandem on the back of (spurious) claims by Trump that the US/China trade talks are advancing well – even though he later contradicted that in a Fox news rant. In Europe, new ECB President Lagarde made her first speech which gave European stocks a slight boost, even though the series of EU and UK flash PMIs disappointed as Brexit concerns continue to weigh.

Looking at the action on Asian markets on Friday, where Chinese stocks really struggled, with the Shanghai Composite down nearly 0.7% to close well below 2900 points at 2886 after struggling all week to get back above that key level. In contrast, the Hang Seng Index found a modicum of buying support, closing nearly 0.5% higher to 26595 points. Price is still anchored below former trailing ATR support and the resistance zone at 27000 points so there’s nothing to get excited about here until price breaches the high moving average:

Japanese share markets took a poor CPI print in stride as Yen weakened slightly throughout the session with the Nikkei 225 closing 0.3% higher to 23112 points, as it held on above daily support levels above 23000 points. 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 is up nearly 0.5% higher going into the close, putting in a good finish to a poor week, currently at 6706 points, helped by a lower Aussie dollar. SPI futures are up a modest 10-12 points going into the open this morning so we’re likely to see another build above 6700 points this week if the Aussie remains low, but the embattled banking sector might struggle to provide the heavy lifting here:

European markets stabilised in the wake of President Largarde’s first speech, helped along by sharply lower domestic currencies with the German DAX finishing some 0.2% higher at 13163 points. The daily chart remains in a sideways consolidation, still maintaining itself above multi-month resistance at 12700 points and not yet threatening trailing ATR support. The  low moving average had been breached briefly, and there has yet to be a new daily high so its caution for now:

Wall Street advanced but only just in the end, with the Dow putting on 0.4%, the other two bigger bourses only up about half that due to a late selloff. The S&P500 finished only 0.2% higher to remain just above the 3100 point level. Price has respected the recent lows on the daily chart, with the 3100 point support area firming in the short term at least.    Momentum readings have reverted to not quite overbought so there is potential for a breakout here and a retest of the former highs:

On currency markets, the USD firmed against the majors, particularly Euro in response to ECB President Lagarde’s double barrel approach to fighting off economic stagnation on the continent, with a big inversion through trailing ATR support and almost through the 1.10 handle. Not a good finish to the week, with momentum now considerably oversold, but price could revert to the previous weekly low at the 1.0980 level here:

The USDJPY pair failed to gain any traction in comparison, which could be a headwind for Japanese stocks on the open, still hovering at the recent four hourly session highs at the 108.60 level.  There is still potential for a breakout above the high moving average as momentum switches to positive, but its not very clear yet:

The Australian dollar continued its slow meltdown on Friday night, remaining well below the 68 handle as it targets the previous weekly low a the 67.60 level. Momentum is nowhere near oversold and this could continue apace to start the week locally:

Oil prices remain on a general uptrend, but Friday night saw a slight selloff in the wake of USD strength with the WTI contract losing around 0.5% to finish just below the $58USD per barrel level. The daily chart is still looking bullish with momentum in overbought readings and suggesting a trend back up to the $60 level:

Finally to gold, which remains stuck between a stronger USD and lower Treasury yields as it melts lower to finish at the $1462USD per ounce level. Price was unable to move back above the $1480 former support, now resistance level during the week, so now we wait for 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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