Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Markets almost brushed aside the strong US jobs print on Friday night and continued to hasten their retreat from risk taking with European bourses falling to a new yearly low, while Wall Street stumbled into the close with a near 2% loss. Fear continues to reign as bond yields plummeted to new record lows, oil prices off by nearly 10% and the USD falling against all the majors to a yearly low. Is this the beginning of the end or more to come?

Looking at Asian share markets from Friday’s session where the Shanghai Composite lost 1.2% to close just above the key 3000 point barrier at 3034 while the Hang Seng Index broke down to a new daily low, finishing 2.3% lower at 26146 points. The previous bounce off weekly support at the 26000 point level was but a short term swing play with no follow through as momentum rolled over and price fell through the previous long held support levels. There is likely to be another leg down from here:

Japanese share markets were the worst off due to the big falls in the positively correlated USDJPY pair with the Nikkei 225 closing 2.7% lower at 20729 points. Futures are looking bad again as price searches for a new weekly low below 20400 points as this steep correction – now off by 15% from the high – continues:

The ASX200 fell alongside everything else, with another wipeout that accelerated into the close, finishing 2.8% lower at 6216 points. This is a near 1000 point drop for the local market and its likely to extend today as SPI futures however are showing a 1.5% plus drop down to 6110 points or so. As I said last week there wasn’t even a bounce, this cat has been dead for awhile:

European markets couldn’t hold back their fears, particularly in Italy where the coronavirus death toll keeps rising, while Euro also steeply appreciated again, with the Eurostoxx and German DAX slumping over 3% on Friday night. The DAX fell way below the key 12000 point level at 11541 points after mid week looking promising, as the dead cat came back to bight on the downside, taking prices back to the August 2019 low (lower black horizontal line). I’m watching for a break below that level tonight:

Wall Street exhibited the classic dead cat bounce pattern more than any other market and combined with watching the USDJPY pair was a great setup for those brave enough to short this market in a time of turmoil.  The S&P500 finished nearly 2% lower to finally close below the 3000 point support level that everyone has been watching at 2972 points. The daily chart of the S&P500 shows a probable return to the previous extreme lows at the 2900 point level – but a quick point to note, the market is still up nearly 9% over the year!

On currency markets, its still all about USD selling even with a strong NFP print with Euro lifting to a near eight month high on Friday, crossing above the 1.13 handle. Its been a big journey in the last two weeks – now 500 pips – with price now breaking through the weekly downtrend from the 2018 high:

The USDJPY pair has always been the best risk proxy to watch and I noted last week that it was not yet convincing that a recovery is underway with Yen buyers continually stepping in to push the pair back down to new weekly lows. Daily momentum continues to gain on the negative side as the 104 target at the August 2019 lows is in sight:

The Australian dollar remains the odd one out due to its commodity proxy role, only gaining slight on Friday night, unable to again build above the 66 handle. Momentum was slightly oversold and has reverted again as the rounding top pattern on the four hourly chart is pushing the pair back down as buying exhaustion sets in:

Oil prices haven’t just rolled over they’ve been abandoned with both markers falling nearly 10% on Friday night as WTI crude fell straight below the key $44USD per barrel level at the 2018 lows (lower black horizontal line). This is indicative of more carnage to follow as economies slowdown, so expect more lows and a march back down to $40 or less:

Finally to gold, which has been the biggest benefactor of the chaos so far – don’t look at Bitcoin as it gaps $1000 lower this morning – with the shiny metal putting in another new high on Friday to finish at the $1674USD per ounce level. The session was wide ranging and maybe indicative of a top but the weight is obviously behind more panic buying:

 

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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