Macro Morning

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MB Radio: Irresponsibility becomes the new black

By Chris Becker 

Risk markets remained cautious overnight in response to the ongoing US/Iranian tensions with European stocks dropping before a late rally on Wall Street saw Treasury yields rise as the mood improved. Gold held on to its big breakout while oil prices moderated only slightly. The USD rose against Yen in the risk-on mood, but fell back against the other majors during an empty economic calendar.

Looking at Asian share markets yesterday where the Shanghai Composite slowly melted higher before the lunch break, then slipped and fell into the close, down 0.3% to 3073 points, still well above the previously long held 3000 point resistance level. Meanwhile the Hang Seng Index also slipped 0.5% to 28305 points, getting back to a more sustainable trendline after late last week’s exuberance. The daily chart shows price action getting back below the high moving average for a breather, but watch momentum if it crosses below the key 100 level for signs of a retracement:

Japanese share markets finally reopened for the new year but due to the downside move in the positively correlated USDJPY pair and the general volatile mood, both major bourses dropped nearly 2% with the Nikkei 225 losing 1.9% to 23195 points. Futures are looking up this morning with a major selloff in Yen overnight that should help support the market at the 23200 level at least:

The ASX200 was the best in the region but only due to a scratch session, not moving at all as markets react to ScottfromMarketing’s “nah mate don’t care about surplus” givings this afternoon in response to the fire crisis. The local bourse closed at 6735 points. SPI futures however are up significantly and ready to make a new daily high. Watch the high moving average here on the daily chart for signs of a new breakout as momentum gets back from oversold levels:

European markets fell swiftly in early trade, not helped by a rise in domestic currencies, but futures filled the gaps post-close. The German DAX almost gapped below daily support to eventually fall 0.7% to 13126 points. Daily support at 13000 or so is still the uncle point but the intrasession price shows a lot of support in futures so this doesn’t look so bad yet:

Wall Street is bouncing back despite the upcoming war – or maybe because of it – with an advance across all three main bourses, but not enough to arrest the previous sessions losses. The S&P500 only gained 0.3% but notably did not make any session lows , bouncing back to the pre-new year highs. Support at 3200 points is quite firm and a good uncle point from here:

Currency markets continue to get whiplash with both Pound Sterling and Euro oscillating back the other way on USD weakness with the latter almost breaking the 1.12 handle overnight.  The union currency remains locked in a cycle between the 1.10 and 1.12 levels and now overhead ATR resistance bears watching for another breakout above 1.12:

Volatility in the USDJPY pair also which after making a new weekly low now breaks to the upside in a swing rally up to the previous 108.30 weekly support level (lower black horizontal line). While good for a short term rally on domestic Japanese stocks, can this decline be arrested:

The Australian dollar still remains below the 70 handle which a minor melt down still underway, but the four hourly chart does show a potential bullish falling wedge pattern forming here as momentum becomes oversold. Traders still have a long time to wait for the February RBA meeting but watch the high moving average level here for a fill:

Oil prices are getting back to normal (sic) volatility levels with WTI retracing slightly back below the $63 per barrel level. The daily chart shows how price approached but was unable to break above the 2019 level, so I still contend we could be in for a rough ride here:

Finally to gold, which had an epic gap breakout on Monday morning that surprisingly held although the candlestick pattern spotters may note some bearishness in the one off action. This takes it up to a seven year high if it holds this week:

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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