Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Fears are fettered with fiscal fiddling overnight with the rebound in Asia extending into the US session, although European bourses remain extremely nervous and put in scratch sessions. The USD bounced back as well with safe haven selling the order of the day, given some respite to risk assets with bond yields slowly rising as well. Oil soared with Brent and WTI lifting more than 10% although industrial metals remain under pressure.

Looking at Asian share markets from yesterday where the Shanghai Composite closed nearly 2% higher at just below the 3000 point barrier while the Hang Seng Index was up about the same before a late selloff saw it only lift around 1.4% to 25392 points. This takes it above the previous price action with a nice bounce on the daily chart – but still nowhere near the weekly support at the 26000 point level – early days yet:

Japanese share markets were the slow performers even as Yen selling gathered pace with the Nikkei 225 only closing just under 1% higher to 19867 points, as nerves are still frayed. Futures are looking a little better as Yen sold off, note how the four hourly chart is all bunched up just below the 20000 key level with momentum clearly signalling a swing trade higher here, at least in the short term:

The monkey’s are out picking bottoms with the ASX200 the winner yesterday, closing more than 3% higher after gapping down the same amount at the open, finishing at 5939 points.  SPI futures are up around 30 points with the 6000 barrier likely to be broken on the open – that’s an impressive bullish engulfing candle on the daily chart, but again still early days:

European markets are still fearful as Italy goes into lockdown with the broader Eurostoxx 50 still falling, down 1.6% while the German DAX finished 1.4% lower as well, closing at 10475 points. The four hourly chart shows a small buildup here post-close in line with the rally on Wall Street but still requires a break above the 10900 level and then the previous key support uncle point at 11400 before getting excited:

Wall Street smelt the fiscal stimulus BBQ and launched higher with broad gains as the S&P500 finished some 5% higher at 2882 points. As I said yesterday if the falls can be arrested here – I was expected even lower before an all in bounceback, say at the 2500 point level – watch the BTFD crowd to step in. They have, but is it sustainable? The four hourly chart is messy to say the least but gives the first inkling of a swing higher underway. Note how the closing price is around the first level of the previous dead cat bounce liftoff and requires a surge above 3000:

Onto currency markets which are coming back with some USD strength after being so weak for so long. Euro finally faltered with a trip down to trailing ATR support on the four hourly chart at below the 1.13 handle. I mentioned a potential rollover here despite the probably big cut coming from the Fed as the four hourly chart is showing a divergence in momentum and price hitting the 1.15 resistance level, and here we are, but not yet done with considerable support at the 1.12 handle proper:

The USDJPY pair has been fantastic as the best risk proxy to watch and perhaps it is signalling the loudest to go back in on stocks – well at least short term! Yen selling was the order of the day overnight (sic) with a big surge up through the trailing ATR resistance level on the four hourly chart, but still nowhere near the previous 108 key support level before this teardown. Momentum has not yet cleared the throat for a full rally, so I’m cautious:

The Australian dollar remained the odd one out due to its commodity proxy role, and despite the oil bounceback is still depressed here as the USD regains strength, falling back below the 65 handle overnight, almost to a two week low.  Momentum was slightly oversold as the rounding top pattern on the four hourly chart came to fruition as a lack of buyers keeps the pair in wait and see mode for the Fed next week:

Oil is still the problem child and no one should be surprised at the volatility thereafter the fall with 10-13% gains overnight on both markers.   WTI crude had a nice surge from just below the $30USD per barrel level to just below $35 but as the four hourly chart notes, this is a bearish rising wedge classic pattern that could be presaging a short covering rally only, with substantial resistance overheard in the short term:

Finally to gold, which after being the biggest benefactor of the chaos has slumped again to finish sharply lower at the $1649USD per ounce level, after briefly toying with the $1700 level. The session was again wide ranging with the previous session indicative of a top but price has not yet rolled over under the weight of temporary USD strength:

 

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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