Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Last night saw the release of the latest US CPI print which nudged slightly higher, sending stocks higher as well but following that the FOMC decided to keep rates on hold which put stock futures into a little tizzy. Expect some mild drops on the open here in Asia, with the resulting hold sending USD sharply lower and undollar assets higher, putting a break on risk taking.

Looking at the action on Asian markets yesterday where the Shanghai Composite closed nearly 0.3% higher to 2924, building above the 2900 point level it broke on Friday, while the Hang Seng Index shot nearly 0.8% higher to finally make a new daily high, finishing at 26645 points. The daily chart is showing solid signs of a probable swing play back up to 27000 points but that high moving average needs breaching first:

Japanese share markets remained sleepy, not helped by a static Yen, with the Nikkei 225 closing 0.1% lower to 23391 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 staid day due to the heavy drop in the positively correlated USDJPY pair:

The ASX200 was the biggest mover, but to the upside this time, closing 0.7% higher to 6752 points as it builds well above key support at the 6700 point level. SPI futures are down nearly 0.4% due to the epic rise in Aussie dollar that will weigh on the market, so perhaps we close the week out just above 6700 points:

European markets are in a holding pattern due to tonights UK election but also the big spike in Euro and Pound Sterling following the FOMC rate hold overnight. Pre-decision, the German DAX lifted 0.5% higher to 13148 points, taking back its previous losses and continuing to respect support at the 13000 point level.  Note however that price is now in a second rung of support with the high moving average and previous resistance level at 13250 proving too strong to get through:

Wall Street edged slightly higher overnight before the Fed meeting, helped by a higher CPI reading with the S&P500 closing 9 points or 0.3% higher to 3142 points. Price is slowly building above the 3100 point former support area and nominally a lower USD should help but this market is still poised and not ready to breakout:

Currency markets were off very much alive overnight with the CPI print and FOMC hold flipping the USD with a solid weekly high for Euro as it spiked above the previous weekly high at the 1.11 handle. Momentum has switched sharply – perhaps too fast and is ripe for a short term pullback to the handle itself:

The USDJPY pair was flat throughout the Asian session yesterday but has reversed to its start of week low at the mid 108.50 level as USD weakness overrides risk taking. The medium term trend has been confirmed here so everyone is watching for a break below the terminal lows at 108.40 or so:

The Australian dollar has surprised to the upside with a lovely uptrend overnight in a series of higher highs almost taking it through to the 69 handle in the wake of the CPI/FOMC one-two punch. Yesterday, the four hourly chart was indicating a potential breakdown but instead its a fantastic reversal – but is it enough to be sustainable?  Watch the previous weekly high at the 68.50 level to hold as new support:

Oil prices have stalled here with Brent falling while the WTI contract slightly lower and closing below the $59USD per barrel level in a tight session. The daily chart shows a consistent trend channel now from the September lows but I still contend there’s a lack of upside potential and a strong USD could wipe out sentiment:

Finally to gold, which was able to capitalise on the weak USD meme to lift higher to the $1475USD per ounce level, but still shy of the previous daily highs and of course that very solid resistance level overhead.  The daily chart is still 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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