Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Last night saw a big risk inversion on trade concerns as the Twit in Chief rolled out new steel tariffs and blamed the Fed and high USD, just as the latest ISM Manufacturing print came in with a surprise fall and contraction, particularly in employment. The USD tanked as a result, sending Euro and Aussie sharply higher while the Asian risk proxy USDJPY slumped, pulling Wall Street down by nearly 1% across the board. It’s going to be a sea of red across Asia today.

Looking at the action on Asian markets yesterday where the Shanghai Composite was up nearly 0.4% on the back of the PMI print, but has closed with a scratch session at 2872 points. Meanwhile the Hang Seng Index tried to recover from its Friday losses, closing 0.4% higher to 26461 points. The daily chart clearly shows that inversion and its going to take a lot more upside and positive momentum to get it back on track above 27000 points:

Japanese share markets did the best in the region, namely on the back of a much weaker Yen throughout the session with the Nikkei 225 closing 1% higher to 23538 points, as it starts to really build above daily support at the 23000 level. The medium term trend remains firm as trailing ATR support has been respected, but futures are indicating a sharp pullback as Yen firmed considerably overnight, so watch the 23000 point level to be broken in todays trade, with a break below ATR support more ominous:

The ASX200 finally pushed above a scratch session, eking back its Friday losses to close 0.2% higher and remaining well above the 6800 points barrier.  SPI futures however are down at least 1.2% or 90 points, as the big rise in Aussie dollar and the slump on Wall Street will see all confidence evaporate. With 6800 taken out the next level to watch is trailing ATR at ca. 6700 or so which must hold to keep this medium term trend intact:

European markets were caught in the Twitter crossfire/shooting in foot with all major bourses down an even 2% or so as the stronger Euro bit into sentiment. The German DAX finished down 2% exactly to break below the 13000 point level with this reversal almost breaking long held support. Watch momentum readings for a possible follow through here:

Wall Street did not like the weaker USD meme and was ripe for a pullback after being overbought for so long. The S&P500 fell 0.9 to 3113 points and is still respecting the 3100 point support area, but this is setting up nicely for a swing short trade with the next level to watch trailing ATR support at 3090 points:

There was more action in currency markets to say the least, where volatility in USD saw most of the majors spike as a result,  Euro in particularly which lept almost through the 1.11 handle and quickly matching its previous weekly high. This is too far too fast and should result in a pullback of sorts, but these sorts of “one-time” inversions can sometimes have legs that defy technical analysis:

The USDJPY pair was looking to break above the 110 handle last week but the Monday stumble has turned into a rout with a full handle breakdown to below the 109 level and taking out the trendline.  This is ominous for risk assets here in Asia and could lead to further Yen buying in the wake of a growing trade dispute which sees no end. I’m watching 109.30 on the upside for a potential swing higher in the short term:

The Australian dollar was the biggest winner overnight, cooking right through the 68 handle against USD as King Dollar slipped on its throne. This is not the sort of volatility the RBA wants just before today’s interest rate meeting and the four hourly candles are suggesting this is too far too fast with a pullback imminent. Pays to watch lower timeframes here, like 30 minute charts:

Oil prices came back slightly overngiht on the weaker USD with the WTI contract recovering to just below the $56USD per barrel level. The daily chart shows how the session lows are being respected at the $55 level which should be a strong support level if momentum holds positive in coming session:

Finally to gold, which was surprisingly weak against the USD inversion overnight and basically finished where it started at the $1463USD per ounce level. There is still hope here of price bottoming out but don’t get too excited unless that high moving average is breached very soon – at least $1470 or so is required:

 

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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