Macro Morning

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Macro Afternoon

By Chris Becker 

Risk sentiment continues to be all over the place with Wall Street falling on Friday night, despite a strong US jobs report that saw over 225K jobs added in January, although of course average earnings remain anemic. The market responded with a higher USD, lower bond yields as the 10 year Treasury fell to 1.57% in a new low, with almost no chance of a more easing by the Fed in March’s meeting. Combined with the falls in stocks, this sets the sentiment for the month ahead, summed up in one word – volatility.

Looking at Asian share markets performance on Friday where the Shanghai Composite was flat throughout the session but rallied at the close to finish just 0.3% higher, closing at 2875 points while the Hang Seng Index went the other way, losing 0.3% to 27404 points. fulfilling the previous bounces and almost getting back to its last support level. I can still see a deadcat bounce here with the 27000 point level the critical area that needs to be supported – look at daily momentum and the low moving average:

Japanese share markets slipped as well with the Nikkei 225 closing some 0.2% lower at 23827 points. Price had rallied strongly above former trailing daily and weekly ATR support at 22800 points but seems to be rejecting resistance overhead at the 24000 points well before it gets there. This recent bounce was probably way over extended, so I’m expecting a retracemnt back to the low 23000s:  :

The ASX200 ended up the worse in the region as risk takers pared back their NFP bids and pushed the local stock market down 0.4%, closing the week out at 7022 points.  SPI futures are actually up a handful of points despite the Wall Street falls, but I would contend that price is likely to be anchored to the 7000 point level to start the week:

European markets took the cue from Asia and dropped, staying down in line with Wall Street as the inability to advance past recent highs was telling. The German DAX closed 0.45% lower to 13513 points, unable to beat its previous price highs but still remaining above previous support at the 13450 point level. Another market unable to breach its former highs, and seems in lockstep with Wall Street:

Wall Street failed to take the good news from the NFP print into more risk taking, instead led by a selloff in tech stocks that saw the NASDAQ fall 0.9% while the S&P500 groped around and then fell 0.5% to remain just above the 3300 point barrier at 3325 points. The BTFD crowd are not doing a good enough job to push the market over its previous record highs, and as I’ve said for quite a while here, it needs a significant retracement to get back to that sustainable trend line below soon, or it may be a wild ride down:

The USD continues to gain strength across almost all the majors again, buoyed by the stronger than expected NFP print on Friday night. Pound Sterling flopped to a new weekly low, taking it back to the pre-Christmas levels below the 1.29 handle while the Euro almost made a new monthly low. The union currency is falling down a series of steps and is now well below the 1.10 handle and setting up for more falls here as weekly support is taken out:

The USDJPY pair wavered a little on Friday night as like stock markets, remains unable to make new highs. The level to watch was the 110.20 high reached in January but as I said last week this might be a bridge too far, so watch for an inversion below the low moving average as momentum tapers:

The Australian dollar hurriedly sold off following the NFP, having been in a short term downtrend since mid week after almost breaking through resistance at the 67.70 level. With a fall in commodity prices and almost no reason for the Fed to cut anytime soon, the Pacific Peso’s future remains down as it breaches the 67 handle once again:

Oil prices were trying to stabilise but failed again on Friday with both Brent and WTI falling nearly 2%, the latter finishing just above the $50USD per barrel level. The daily chart shows how price action is still below key monthly support, and needs to spike well above the $54 level before even thinking about considering this over:

Finally to gold, which held on surprisingly well post the US jobs report after its smackdown earlier in the week, finishing the week on a solid note at $1570USD per ounce. This keeps it well above ATR trailing support at the $1550USD per ounce level and combined with positive daily momentum keeps away the bears:

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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