Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Again, markets are in the thrall of a US President’s comments, with Trump threatening tariffs against France – while in France and celebrating 70 years of the NATO Alliance – and conceding that the US/China trade deal may not go through until the election. US stocks markets flopped as a result with a rush to safe havens like gold, bonds and Yen, with the USD continuing its slide down.

Looking at the action on Asian markets yesterday where the Shanghai Composite was looking to put in a scratch session, helped by a better Yuan fix but then surged at the close to finish 0.3% higher at 2884 points, still shy of the 2900 point level. The Hang Seng Index slipped however after gapping down horribly at the start of the session to be off only 0.2% at 26391 points, with daily futures indicating a slump on the open this morning in the wake of Trump’s comments on the China deal. This would take out recent daily support and possibly send the bourse closer to monthly support nearer the 25400 level:

Japanese share markets didn’t have a good time of it, reflecting the poor performance from Wall Street and the risk proxy USDJPY pair’s falls, with the Nikkei 225 closing 0.7% lower to 23363 points, still clinging above daily support at the 23000 level. While trailing ATR support has been respected, futures are indicating another sharp pullback to that level so watch the 23000 point level carefully, with a break below ATR support more ominous:

The ASX200 bore the brunt of the ill will, falling over 2% to close at just over 6700 points, crushed by rate cut expectations from the RBA and a much higher Aussie dollar.  SPI futures are down another 60 points or nearly 1% so there goes the Boomer’s Xmas present but someone will come up with an article about “never a better time to buy bank stocks for their dividend yield” soon. The September low at 6400 is the target here:

European markets remain caught in the Twitter crossfire and live Twit-in-Chief shooting off of mouth but the German DAX actually stood out and managed to put in a positive session, closing 0.2% higher to remain just above the 13000 point level. While momentum readings are poised to break into negative territory, so far ATR support is holding:

Wall Street fell the most however, with the headline DOW off by 1% exactly, the S&P500 fell 0.6% to 3093 points, falling through the 3100 point support area and threatening to breakdown completely. This is still just a sweet swing short trade but could open up into a proper hedge soon where I’m waiting for a complete break below ATR support and inverted momentum:

Volatility in USD continues to the downside with Pound Sterling spiking while Euro consolidating at or around the 1.11 handle but not yet breaching. As I said yesterday this move 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 is feeling the brunt of the risk off attitude, almost falling to a weekly low overnight after bunching up at the 109 handle looking for support. This move continues to provide headwinds for risk assets here in Asia and could lead to further Yen buying and a return to the 108 handle before the week is out:

The Australian dollar came back slightly overnight, after being overcooked throughout the Asian session, but it was short lived as it finishes at the mid 68 level. You can see the step off following the RBA meeting at the 68.20 level and that should be firm support going forward however I’m watching for a possible swing lower if USD returns to form unexpectedly:

Oil prices came back again overnight on the weaker USD with the WTI contract pushing slightly above the $56USD per barrel level. The daily chart shows how the session lows are being respected at the $55 level which should build as a strong support level if momentum holds positive but I’m wary of a return to a strong USD that could wipe out sentiment:

Finally to gold, which after being depressed for so long has finally come alive here by lifting over $10 up to the $1477USD per ounce level, almost back to prior support now firm resistance at the $1480 level. Is price finally bottoming out here or is this a short term reprieve? A sustainable trend needs to take out that resistance level, plus trailing ATR  and then the psychologically important $1500 level before getting excited:

 

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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