Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Fear is back as another packed night of volatility where the WHO declared the coronavirus a pandemic, Wall Street lost its shi(r)t, while bond markets went haywire and actually sold off with a big jump in still-depressed yields. The 10 year US Treasury yield went from 0.65% to 0.85% while currency markets were sanguine, the USD rising slightly while the Aussie dollar fell against everything – even Kiwi! The BOE surprised all with an out of cycle big rate cut, sending Pound Sterling to a new two week low while commodities also fell back as oil tripped again and industrial metals fell slightly.

Looking at Asian share markets from yesterday where the Shanghai Composite was travelling well before the long lunch break but gave up its gains going into the close, down some 0.6% to 2980 points, just unable to get back above the 3000 point barrier. Meanwhile the Hang Seng Index is off about the same to close at 25219 points, also unable to get back above a key weekly support level above 26000 points. Futures are indicating a rollover here in line with the risk-off meme and we should be seeing a new weekly low:

Japanese share markets were unable to find any confidence, taking back the previous gains and then some as Yen buying started again, the Nikkei 225 closing 2.2% lower to 19416 points, as nerves remain frayed. Futures are looking worse with the four hourly chart still showing price all bunched up just below the 20000 key level with momentum now switching back to the dark side. Flip this chart upside down and you’d be long yes?

The bottom pickers were feeling the pain locally with the ASX200 the big “winner” again yesterday, this time closing more than 3.5% lower to 5725 points as recession realisation sets in.  SPI futures are down another 200 points so it could get ugly again, despite a lower Aussie dollar as well. What a fall from grace!

European markets have almost run out of sellers with only minor falls overnight before the US open. The broader Eurostoxx 50 was off by 0.15% while the German DAX finished 0.4% lower, closing at 10438 points. The daily chart however shows next to no chance of getting back above previous support at the 10900 level as price rolls over and heads to a new daily/weekly/monthly low, with the 10,000 point psychological barrier likely to be broken soon:

Wall Street is slowly waking up to the inept domestic handling of the coronavirus with another round of broad losses as the S&P500 took back all of its recent big bounce to fall 4.9% lower at 2741 points. As I said previously the falls need to be arrested here or the signal it will send to other stock markets is go sell-sell! The 2600 point level is the real uncle point, breaking the long held trendline from the 2008 lows and calling this epic 12 year bull market over:

Onto currency markets where the USD keeps coming back as Euro melted a little lower, breaking through trailing ATR support on the four hourly chart to a new intraweek low  below the 1.13 handle. This rollover despite the probably big cut coming from the Fed next week is probably anticiptaing tonight’s ECB meeting which could be explosive in terms of monetary support and other helicopter type measures, so stay tuned for volatility plus:

The USDJPY pair is still the best risk proxy to watch and was signalling to go back in on stocks at least short term, but not much has changed in 24 hours with Yen selling abating but no new run on the safe haven either, with a pause here above the 104 handle. Watch that low moving average very carefully as momentum has not yet cleared the throat for a full rally, so I’m cautious at best:

The Australian dollar continued its inability to gain traction as lower commodity prices weighed the Pacific Peso down once more, breaking back below the 65 handle overnight, now at a two week low.  Momentum remains slightly oversold as the rounding top pattern on the four hourly chart is presaging further falls ahead:

Oil remains the problem child with both Brent and WTI crude falling 3% or so, with the latter retracing back to the $33USD per barrel level. The four hourly chart has a classic bearish rising wedge pattern that is tentatively broken with a pause here and probable rollover if the risk off mood in equities continues:

Finally to gold, which remains poised here at its recent record high but unable to punch through the $1700 level with another fall back to short term support at $1635USD per ounce. The session was again wide ranging with a lot of selling later on as Wall Street fell, but price has not yet rolled over with the $1600 level still a viable uncle point:

 

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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