Macro Morning

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Australian dollar hits 0.67

By Chris Becker 

Bouncy bounce bounce! Wall Street surges over 5% higher overnight as Asian stocks took the lead yesterday to push risk markets higher after a week or so of carnage. This is partly in response to a coordinated effort by central banks to start easing aggressively to counter the economic slowdown from the coronavirus, but also technically as prices were extremely oversold and ripe for a bounce. Currency markets were less sanguine with Euro still higher while commodity currencies saw a mild uplift as oil and industrial metal prices spiked.

Looking at Asian share markets from yesterday where the Shanghai Composite soared ahead, up 3% to close at 2970 points while the Hang Seng Index finished 0.6% higher to 26291 points, bouncing off the January low point. This is a good start but nowhere near out of the woods yet, requiring a follow through today above the low moving average level at 26400 points at least:

Japanese share markets saw a neat bounce in line with a mild selloff in Yen with the Nikkei 225 gaining just under 1% to 21344 points. Not quite a bullish engulfing candle on the daily chart, with momentum still in extreme oversold levels and not yet signalling a bounce – this is catching knives territory still, but watch correlations with other risk markets:

The ASX200 gapped down on the open and sold off sharply before a lunch led recovery – a few beers always helped with Dutch courage – saw the losses contained to less than 0.8%, with the bourse closing at 6391 point.  SPI futures are up at least 1% as Aussie stocks lag the rest of the risk complex, which could turn into some panic buying. The clear uncle point at the 6300 level has worked so far, but as for the Nikkei above, this is not yet an open signal:

European markets had modest sessions overnight as the weight of the much higher Euro offset any easing from the ECB. Only the FTSE saw meaningful gains, up a little over 1% while other continental stocks had mild scratch sessions, the German DAX actually lost more ground to close 0.3% lower at 11857 points. However, post close futures in line with Wall Street have seen a big spike above the key 12000 point level, so it will be a wild session later tonight:

Wall Street was extremely volatile with huge fills as the BTFD crowd finally stepped in. The headline DOW rallied over 5% while the NASDAQ and S&P500  lifted just over 4.5%, taking back Friday’s and then some losses. The four hourly chart of the S&P500 shows the first stages of a possible recovery as momentum is coming back from being WAY off the scales, but this could just be a short term dead cat bounce:

In currency world, the USD is still losing a battle against a resurgent Euro which continued its spike up through the 1.11 level. This is way overextended, but could go further on more panic buying, with the December highs at the 1.12 level a possible target:

The USDJPY pair is the best risk proxy to watch again and saw some mild repositioning overnight, moving back to the hgih moving average on the four hourly chart to be almost at the mid 108 level this morning. This keeps it just above the daily support level that held throughout most of the latter half of 2019. Daily momentum is still in negative mode so I’m a bit hesitance here, watching for a breakout above the 109 handle though:

The Australian dollar is somewhat replicating stock markets here with an engulfing move higher yesterday on the open that continued a little overnight, but fizzled this morning as we head into today’s RBA meeting. The Pacific Peso remains horribly depressed and is likely to fall further through to another yearly low, but I am watching for a potential factored in spike up towards the 66 handle as shorts are way overextended here:

Oil prices finally stopped their freefall with Brent and WTI crude rallying nearly 4% overnight, with the latter jumped up towards the $48USD per barrel level. The daily chart shows a nice bullish engulfing candle that should translate into another gain tonight if central banks follow through:

Finally to gold, which is struggling to get out of its slump, wavering at $1590 and unable to get back above the $1600USD per ounce level in a wide session as the bulls and bears battle it out. I said previously there is chance of stability here unlike equities but that $1600 level and ATR trailing support has been clearly pushed aside so the level to support here is $1555 or so:

 

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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