Macro Morning

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Macro Afternoon

By Chris Becker 

Today in Asia, markets will be watching the Chinese Q4 GDP print and have a wave of bullishness behind them if it all goes to plan as Wall Street made yet another record high in the wake of solid retail sales data for December. The USD re-engaged its strength against the majors – except gold which is hanging on – and bond yields rose as the risk on mood spread.

Looking at Asian share markets yesterday where Chinese stocks continued to struggle with a higher Yuan as the Shanghai Composite fell 0.5% to remain well below the 3100 points level, closing at 3074 points. Meanwhile the Hang Seng Index was looking to put in a scratch session and surged at the close to finish up 0.4% at 28883 points. The daily chart shows continued support as price remains elevated with solid momentum, but I’m still watching  for a potential reversion below the high moving average and short term support at 28400 points:

Japanese share markets made no headway with the Nikkei 225 stuck again, gaining only a handful of points to close at 23933 points. The daily chart is looking better when futures are involved as the selloff in Yen rejoined overnight, which will push the market back up to its previous pre-Christmas high and possibly above 24000:

The ASX200 was again the only market to really advance during yesterday’s session, soaring to new record highs above the 7000 point level by lifting 0.7% to 7041 points. SPI futures are up 36 points or over 0.5% so expect fireworks and more frantic buying and more record highs today – this can only end well!

European markets are still struggling to find traction and remain the standout amongst the risk markets with the FTSE falling 0.4% and the German DAX slipping again by a handful of points, finishing with another scratch session at 13429 points. The daily chart clearly shows the inability to gain any traction at the previous upside resistance level at 13450 points, with continual failure to make a new daily high, even despite a lower Euro. However, momentum remains in overbought mode and the low moving average has not been touched yet:

Wall Street can’t be held back – damn the torpedoes! All three bourses led to new record highs, with the S&P500 up a very solid 0.8% to 3316, smashing through the once hesistant 3300 point barrier. Are we in for another 30% year on year return in 2020?

Currency markets had early USD softness before the economic releases overnight when the USD strength kicked in again with the Euro unable to make headway above the 1.1150 midlevel, pushed back to its nascent uptrend line. Momentum has now flipped and the dominant medium term downtrend is showing itself again here – watch for a break below that downtrend line:

The USDJPY pair pushed higher again after being poised at just below the 110 level, making both a new session and weekly high as the risk on mood matures. This should provide a very solid tailwind for domestic Japanese stocks as all the Yen longs get wiped out:

The Australian dollar almost broke out from the small reverse in sentiment before the release of the US retail sales numbers, which then pushed it back below 69 handle. Momentum was starting to kick up but the lack of a high above the start of week gap higher is telling, but I do note that price seems well supported at the 68.80 level which could provide a high risk uncle point for Aussie bulls now:

Oil prices are slowly building buying support here as traders reposition, with the WTI contract lifting slightly to finish at the mid $58 per barrel level with no new intrasession low. That’s four sessions in a row where the lows are being supported, so this could be a bottom, but too early to tell as medium term momentum is behind further price falls:

Finally to gold, which is still holding after suffering from some deflation on its recent bubble and finding support here, albeit slipping slightly to finish at the $1552USD per ounce level. The daily chart is slowly letting air out of the bubble, but watch ATR support at the $1540 level that must hold or a selloff could eventuate:

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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