Macro Morning

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Macro Afternoon

By Chris Becker 

The relief rally continues as the de-escalation in the US-Iran brouhaha boosted risk sentiment higher, although the recent news of the Ukrainain jet disaster being Iran shooting the jet down will complicate this significantly. Nevertheless, stock markets reached new record highs again on Wall Street, while bond yields are higher and currencies are mixed with Pound Sterling falling on dovish comments from Governor Carney overnight.

Looking at Asian share markets yesterday where the Shanghai Composite zoomed higher, closing up 0.9% to 3088 points, while the Hang Seng Index advanced even further, gaining some 1.2% to be at 28412 points after bouncing off daily support. The daily chart shows price action returning back to the high moving average with momentum is still in overbought mode which should support a continued uptrend:

Japanese share markets continued their high volatility but it was all upside as Yen sold off violently in the overnight session. As a result, the Nikkei 225 closed over 2% higher to 23712 points. Note how price is supported very firmly at the 23000 point level, a great uncle point to support this rally with the upside target at the former high at 24000:

The ASX200 was the worst in the region, but its all relative, closing 0.8% higher to 6874 points. SPI futures are up 14 points or 0.2% on the continued relief rally so we may see a push up towards a new record high again nearer 6900:

European markets pushed higher in unison with other risk markets with the German DAX gaining 1.3% to finish at 13495 points in a very solid session – new daily and weekly high. Daily support at 13000 or so is now a longer term uncle point here, as the previous upside resistance at the 13450 level is broken. I’m watching for another session above the high moving average to get moving:

Wall Street is all in with all three bourses pushing to new record highs with the S&P500 up 0.7% to 3274 points. The four hourly chart shows how price has broken through resistance at 3254 with lovely smooth price action above the high moving average, giving a short term  hedge at the low moving average if you contend this rally doesn’t have any real steam behind it:

Currency markets are mixed however with Euro threatening the 1.11 handle again in what looks like a deflated selloff – note the falling wedge pattern.  The union currency is still in a cycle between the 1.10 and 1.12 levels but this could break the cycle if the retest at the 1.10 level is successful:

The USDJPY pair continued for a little longer after its wild swing previously, almost back up to the previous daily/weekly high at the 109.60 level but not quite there overnight.   This continues to  be an obvious tailwind for domestic Japanese stocks but could stall out here on overbought momentum:

The Australian dollar is barely holding on and almost immune to the USD strength meme, but cracked a little overnight by making a series of session lows to get down to the mid 68s.  The long wait for the February RBA meeting and the pro-US macro events are really weighing on the Pacific Peso, with the probability of a rate cut in February firming now to 60%:

Oil prices continue their selloff but in a mild mood overnight with the WTI contract finishing just below the $60 per barrel level. This is not yet a full selloff even though price has broken below daily ATR support and momentum has inverted, I still contend this move should settle around the $60 level as part of a weekly uptrend:

Finally to gold, which continued to show the most excitement and after spiking above $1600USD previously, is now settling just above the $1550 level. The daily chart is still in a bubble like phase, requiring a steady hand in the next couple of days or some minor falls down to the $1500 level before picking up again, or watch the short positions pile in:

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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