Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Markets were kept guessing again overnight on the direction or implementation of the December 15 China tariffs with a clawback of Friday nights exuberance on both sides of the Atlantic. Currency markets were quiet alongside bonds with Wall Street slipping on the lack of any good news, although Pound Sterling rallied as the potential return of the Tory “government” in this week’s election firmed.

Looking at the action on Asian markets yesterday where the Shanghai Composite closed only 2 points higher, still remaining above the 2900 point level it broke on Friday, but only just. Meanwhile the Hang Seng Index did the same with a scratch result to finish at 26510 points. The daily chart is showing tentative signs of a probable swing play back up to 27000 points but price is still looking bearish overall as it has several resistance levels to beat before getting back to a positive frame:

Japanese share markets did better despite the stronger Yen, with the Nikkei 225 closing 0.3% higher to 23430 points, still remaining well clear of daily support at the 23000 level. Trailing ATR support continues to be respected during this consolidation, and resistance overhead at the early November highs at 23600 points remains the target to breach, but futures are suggesting another failure to launch today:

The ASX200 advanced the most, lifting some 0.3% to 6730 points as miners and other mineral stocks helped pushed the whole edifice higher. SPI futures are down 14 points or so, therefore the market is likely to pullback in line with Wall Street as the 6700 point level becomes an anchor. This is a jumbled daily chart, unable to gain positive momentum and still potentially on its way down:

European markets were weighed down by the lack of any good news, with only the FTSE escaping with a scratch session as the rest of the continent fell back nearly half a percent or so.  The German DAX closed nearly 0.5% lower to 13105 points to take back half of its Friday night gains, but still remaining clear of support at the 13000 point level.  Momentum readings are still quite anemic for the DAX as price is still unable or willing to move back to the previous resistance level at 13250:

Wall Street failed to gain traction as the S&P500 closed 0.3% lower to 3135 points as the stronger USD weighed. The failure to match the previous record high although still building above the 3100 point former support area is now turning into a potential reversal as momentum rolls over. Watch for the BTFD crowd to step in soon or Trump to mouth off something:

Currency markets were relatively quiet given the lack of data and catalysts, although Pound Sterling was again an exception, as it tried to spike again to make another weekly high and try to finish the year on a literal high note. The Euro flopped around the mid 1.10 level and remains nominally above ATR trailing support but I still expect this to be broken soon as momentum is weighing it down:

The USDJPY pair melted throughout the Asian session but found some life midway through last nights session before flopping again, finishing nearer the mid 108 handle once more.  Yen buying still seems to dominate here and there could be another return to last week’s lows at the 108.40 level:

The Australian dollar continues to put on a happy face but remains unable to make any gains as the strong USD kept it well below the mid 68 level again overnight. 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 are wanting to break higher but risk assets are not yet completley aligned, so the WTI contract was tightly traded around the $59USD per barrel level again. 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 able to finish where it started – depressed as usual. By holding on around the previous daily lows around the $1460 level the daily chart is pretty clear that this bearish trend will continue unless there’s a violent upswing through the $1500 level:


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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