Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

US stock markets returned from their long weekend and went on the defensive straight away, absorbing the Apple guidance cut with some mild falls on Wall Street after European bourses fell in response to a rout in Asia. The USD is up against all the majors – save gold which has zoomed away above the $1600 mark – with some Yen selling but probably not enough to buoy spirits on Japanese markets today. Commodities were mixed with Brent rising, but WTI stumbling, while a fall in iron ore prices and the latest RBA minutes is sending the Aussie dollar to the doldrums.

Looking at Asian share markets yesterday where the Shanghai Composite stumbled around after its long lunch break, finishing with a scratch session at 2984 points while the Hang Seng Index dropped sharply lower by 1.5% to 27530 points taking back all of the previous weeks gains. As I’ve been stating, the recent uptrend required a break through firm resistance at the 28000 point level, as momentum was not yet positive. Watch for price to break below the low moving average to call this swing move over:

Japanese share markets are now tripping over themselves as the risk off clarion rings, with the Nikkei 225 losing 1.4% to 23193 points, wiping out half of its recent gains. Price continues to reject resistance overhead at the 24000 points with daily momentum rolling over again as futures indicate another retracement although a blip higher in the USDJPY may help stave off wider selling:

The ASX200 put in another scratch session, down 0.16% or so and barely getting out of the gates so far this week, stalled just above the 7100 barrier. SPI futures are up around 5 points or so despite the poor lead from Wall Street but note how price is bunching up at the former highs, indicative that the bearish double top pattern might have some currency:

European markets couldn’t follow through with their good start to the week with the FTSE and German DAX both closing around 0.7% lower, the latter at 13682 points. Price action is revealing a possible swing lower high, so watch for a close below the high moving average and an inversion of momentum below the overbought reading:

Wall Street reopened with the S&P500 dropping nearly 0.4% lower to 3370 points, finally arresting the unstoppable series of new record highs. The four hourly chart shows the first completion of the bearish rising wedge pattern but requires a full breakdown below trailing ATR support and then the 3300 point level proper before the bears can get excited:

In currency world, its all about the USD which is advancing against everything it seems – except gold! Pound Sterling tried to get out of its funk but failed while Euro slumped on a very poor German ZEW survey, breaking through the 1.08 handle for the first time in nearly 3 years. The terminus for this move is still very hard to discern but in the medium term it could get to the 2016/17 lows at the 1.04 level:

The USDJPY pair is still wavering here  but continues to be unable to advance and remains stuck just above trailing ATR support with only a small blip higher overnight on overall USD strength.   Resistance at the 110.20 high reached in January is the real level to beat here in the medium term, so I’m watching for a follow through higher above the high moving average as momentum picks up on the return of US traders:

The Australian dollar folded as expected following the release of the RBA minutes with City trading taking it back to its previous low below the 67 handle before a small bounce in later trading. The four hourly chart shows price barely hanging on as tentative support just above 67.10 was taken out yesterday, there is likely to be another capitulation that takes its down to the other end of the trend channel soon:

Oil prices diverged a little in fortune overnight as Brent continued to surge while WTI crude stumbled on the return of US traders, with the latter finishing just above the $52USD per barrel after a wide ranging session. The daily chart shows how price action is really struggling to make any further headway here as momentum wanes, although there is still potential for a move higher up to trailing ATR resistance at the $55 level:

Finally to gold, which proved the patience of US traders particularly with a lovely breakout overnight, bursting through the $1600USD per ounce level, taking it to back to an eight year high. Price has kept well above ATR trailing support at the $1550USD per ounce level throughout this move, so combined with positive daily momentum and a series of new daily/weekly/monthly/yearly price highs, can’t be held back any longer:

 

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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