Macro Morning

See the latest Australian dollar analysis here:

MB Radio: Irresponsibility becomes the new black

By Chris Becker 

Risk markets continue to stumble around in the new year with the latest US economic data surprising slightly to the upside, pushing the USD higher against almost everything, but in particular the Australian dollar which crashed to a monthly low. Tensions over Iran have almost dissipated – the calm before the storm – while oil prices cooled slightly, everyone’s favourite crypto currency jumped the $8000 barrier again.

Looking at Asian share markets yesterday where the Shanghai Composite pushed higher after its recent scratch session, closing up 0.6% to 3104 points, while the Hang Seng Index gained 0.3% to 28322 points, taking back some of its recent losses and providing a more sustainable trendline after late last week’s exuberance. The daily chart shows price action getting back near, but not above the high moving average, but momentum is still skirting along suggesting that price should be supported from here:

Japanese share markets were also in the money as Yen selling pushed them higher with the Nikkei 225 almost taking back its start of week losses to close up 1.6% to 23575 points. This may not be enough to stave off a wider selloff this morning despite a slightly lower Yen overnight so I’m watching support at the 23200 level to hold and for a breakout above the high moving average on the daily chart:

The ASX200 was a standout again, lifting more than expected to close 1.3% higher to 6826 points. SPI futures however are up only a handful of points which is not a firm indicator of today’s direction given the oscillation on Wall Street overnight. Only the lower Aussie dollar will support risk taking today:

European markets were mixed throughout their sessions despite a lower Euro with the German DAX the standout by gaining nearly 0.8% on the back of some very strong retail sales data for December, while other continental bourses slipped. Daily support at 13000 or so is still the uncle point here but this consolidation is going on and on:

Wall Street tried to bounce back but was unable to advance and instead slipped in late trade with the S&P500 down 0.3% to 3237 points. The four hourly chart shows how resistance at 3254 is firming but this whipsaw is looking like returning to key support at 3200 points in the short term:

Currency markets are still oscillating with Euro failing to beat overhead resistance at the 1.12 level despite some good macroeconomic news, rebuffed and headed back to last Friday’s lows at the 1.1140 level.  The union currency remains locked in a cycle between the 1.10 and 1.12 levels with no new daily high since the new year bearing down on sentiment:

The USDJPY pair slowly continued its swing play higher from oversold levels, sitting at the mid 108s going into the Tokyo open this morning. This takes it back above the previous 108.30 weekly support level (lower black horizontal line) but only just and only good for a short term rally on domestic Japanese stocks:

The Australian dollar was the highlight for the night with an epic fail of the nominally bullish falling wedge pattern on the four hourly chart, breaking below the 69 handle and taking back all of the Santa Claus rally. The long wait for the February RBA meeting and the pro-US macro events are weighing on the Pacific Peso, with a short term swing higher possible on the extreme oversold status, but this could be the start of a rout for the rest of January:

Oil prices are easing off thankfully, with WTI remaining slightly below the $63 per barrel level in a relatively quiet session overnight. 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 as short positions are very weak:

Finally to gold, which after its epic gap breakout on Monday morning that has held, has again advanced to a new daily high, closing at $1573USD per ounce. This keeps it well above the previous resistance level and sets it up for further advances:

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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