Macro Morning

By in Australian Dollar, Australian Shares

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See the latest Australian dollar analysis here:

Australian dollar weakness governed by RBA

By Chris Becker 

A big surge on overnight markets with US stocks making new record highs in the wake of fresh optimism surrounding the US/China trade deal and the run up to the Black Friday retail orgy. Tech stocks led the way while European bourses also had a solid night with more ECB wonkery explaining instruments will be adjusted – read: more liquidity coming!

Looking at the action on Asian markets yesterday, Chinese stocks had a much better start to the week than anticipated, with the Shanghai Composite taking back its Friday losses to close nearly 0.7% higher and back above the 2900 points resistance level. The Hang Seng Index did even better due to the pro-democracy voting result from the weekend, launching 1.5% higher at 27028 points. This puts price back above previous trailing ATR support and test the resistance zone at 27000 proper, setting up for a potential breakout from here:

Japanese share markets also had a strong push, helped by a much weaker Yen with Nikkei 225 closing 0.7% higher to 23292 points, as it builds above daily support levels at 23000 points. The medium term trend is firming now as trailing ATR support has been respected, with the recent dip only a small blip as a much higher USDJPY pair overnight should push Japanese markets to new monthly highs:

The ASX200 is the relative laggard, up only 0.3% to advance further past the 6700 points barrier, despite the banking sector concerns as Westpac lost ground again. SPI futures are up nearly 30 points or 0.4% given the strong bid on Wall Street overnight, so there is potential to breakout here to a new monthly high:

European markets are starting to gain traction too, helped along by domestic currencies with the German DAX finishing 0.6% higher at 13246 points. The daily chart is moving from a sideways consolidation to a rectangle breakout pattern after maintaining itself above multi-month resistance at 12700 points and not yet threatening trailing ATR support. Watch for a new daily/weekly/monthly high to be taken out tonight:

Wall Street advanced across the board, tech stocks pushing the NASDAQ to a new record high while the S&P500 finished 0.75% higher to surpass its mid November daily high at 3133 points.  Price has respected the 3100 point support area and with momentum readings now reverted to overbought status there is potential for a follow through new trend here:

On currency markets, the USD continued to firm against the majors, with Euro falling again to be almost through the 1.10 handle. This doubles down on the poor finish of last week and is testing for a return to the previous weekly low at the 1.0980 level here:

The USDJPY pair has finally broken out of its funk, with the usual Monday morning gap higher leading to a sequence of session highs on the four hourly overnight. The risk proxy is working again in line with stock markets, and this should give a nice tailwind for Japanese stocks today. The level to beat here is obviously the 109 handle before taking out the the mid 109’s for a new monthly high:

The Australian dollar continued its slow meltdown from Friday night, this time breaking below the previous weekly low at the 67.60 level. Momentum is now clearly oversold and ready to continue sending the Pacific Peso down to the next target level at the 67 handle proper:

Oil prices are stalling here after getting some good momentum last week, with the mild selloff on Friday night turning into a scratch session overnight as the WTI contract remained steady at a hair underthe $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 after remaining stuck between a stronger USD and lower Treasury yields continues to melts lower to finish at the $1454USD per ounce level and almost making a new daily low. Price is completely unable to move back above the $1480 former support, now resistance level so a retest of the lows below $1450 is coming 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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