Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Friday night saw the big event on the calendar – the latest US unemployment figures via the non-farm payrolls (NFP) – which set the tone for the rest of the month and indeed year for risk taking. The release easily beat expectations, driving the unemployment rate down and sending risk markets higher across the board with the USD pushing all undollar assets down in sync. This means a green screen for most traders here in Asia so expect a good start to the week as we get into the Christmas spirit!

Looking at the action on Asian markets on Friday in anticipation of the release where the Shanghai Composite lifted 0.4% and finally closed out the week clear of the 2900 point resistance level as it builds up momentum. The Hang Seng Index did even better, closing 1% higher to 26498 points as this bounceback gains some legs. However, even a cursory look at the daily chart shows a swing longshot only for now, because price is still looking bearish as it has several resistance levels to beat before getting back to a positive frame:

Japanese share markets had a modest session, with the Nikkei 225 rising only 0.2% higher to 23354 points, still well clear of daily support at the 23000 level but only moving sideways. Trailing ATR support continues to be respected during this consolidation, but futures are indicating a much better bounce this morning in line with risk assets. A clear breakout is on the cards if price can beat the early November highs at 23600 points:

The ASX200 also had a modest finish to a very volatile week, closing 0.4% higher to 6707 points as the bottom pickers try to fill in the big gap from the major selloff previously.  SPI futures are up 35 points or 0.5% in the wake of the NFP print so this bounce will continue and then probably pause at the former 6790 high:

European markets had been weighed down all week by rises in domestic currencies plus poor macro releases, but being correlated risk assets, the continent rose later in the session on Friday night along Wall Street. The German DAX closed nearly 0.9% higher 13166 points to remain clear of support at the 13000 point level. This was one of the poorer results with other markets lifting well more than 1% as Euro tumbled. Momentum readings are still quite anemic for the DAX but price is now moving back to the previous resistance level at 13250 that if broken means a 2020 breakout:

Wall Street finally got out of its funk with broad gains across the three main markets with the S&P500 closing 0.9% higher to 3145 points, almost matching its previous record high and building strongly above the 3100 point former support area. The daily chart shows this trend ready to break out higher again – notice how quite a lot of markets are correlated here – so watch momentum levels as the market tries to break free once again:

Another NFP and another night of volatility for currency traders with most undollar assets sold off in the wake of a much stronger USD, although Pound Sterling was a notable exception, holding on to its recent gains. Swiss Franc, the Canadian Loonie and of course Euro were the main causalities with the union currency flopping nearly one handle on the print, unable to sustain itself above the 1.11 level prior. A late bounceback saw it close at the 1.1060 level and marginally above ATR trailing support but I expect this to be broken again tonight:

The USDJPY pair had a mild lift higher and then retreated strangely thereafter to finish at the mid 108 level, although risk assets here in Asia have momentarily forgotten the correlation trade as futures indicate rises across the board. Yen buying still seems to dominate here and there could be an uneasy gap down on the open this morning, so watch the extreme session lows at the 108.40 level closely:

The Australian dollar put on a happy face but was unable to make any gains on Friday night despite the rise in commodity prices as the strong USD pushed it down to yet another session low at the 68.40 level. The four hourly chart remains in a bullish flag pattern but the series of lower highs may soon break and presage a return to the previous support/resistance pre-RBA meeting level at 68.20 level or so:

Oil prices have finally broken higher with Friday’s session seeing the sweet black tea hit new monthly highs with the WTI contract up through the $59USD per barrel level. The daily chart shows how the recent daily highs have been broken and while this is nominally a good move, the lack of upside potential and a strong USD could wipe out sentiment:

Finally to gold, which was just holding on to its own recent breakout gains hovering at the $1477USD per ounce level before getting slammed on Friday to return almost back to its previous daily lows around the $1460 level.  This is ominous indeed – turn the chart upside down and you’d be a buyer for sure!


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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