Macro Morning

See the latest Australian dollar analysis here:

Australian dollar to blow-off then blow up

By Chris Becker 

Panic and fear are ruling markets, with stock markets likely to see restrictions in trading soon if this epic volatility continues. Wall Street suffered its worst falls since Black Monday 1987, with the Dow off nearly 13% in a single session. What makes this unique (the panic selling is perfectly normal human behaviour) is that bonds are getting sold off, while the USD is lower, with gold having a wild session overnight and Bitcoin now below $5000 making so-called safe haven buys not quite safe as expected.

The craziness extends to the Aussie/Kiwi cross – almost at parity!

And another interesting chart – the VIX is almost at the GFC high, so maybe we’re not quite there yet?

Looking at Asian share markets yesterday, the Shanghai Composite was down slightly before the lunch break but then put the hammer down into the close, eventually closing 3% lower to 2789 points while the Hang Seng Index fell over 4% lower to 22991 points, taking back half of the previous one day gains. Get on the sell train as new daily/weekly closes are made and momentum is still in negative mode:

Japanese share markets were surprisingly the best performers, only losing 2% or so as Yen buying ramped up on the morning gap, absorbing the weekend news. The Nikkei 225 fell 2.5% to just over 17000 points. Futures are looking decidely dour however, with the 16000 point level likely to come under threat today:

Can’t use many other superlatives for the ASX200 but a definited Keanu Reeves: whoah. After Friday’s rally snapped up a lot of fools and bottom pickers, yesterday’s session has scared off anyone wanting to buy, falling nearly 10% and almost closing below the 5000 point level, losing over 500 points. SPI futures indicate more chaos today – I can only think there’s going to be a suspension of trading soon:

European markets joined the sell train again with 5-7% falls across the continent, with the broader Eurostoxx 50 down 5.2% while the German DAX did the same, down 5.3% to finish at 8742 points. More bad news to come after the Wall Street wipeout:

Wall Street slapped away the hand holding Fed with fear ruling everywhere. The biggest one day falls in over 30 years saw the S&P500 close 12% lower to 2386 points, wiping out the previous 10% plus rally. The bearish engulfing candle on the daily chart shows we’re now in the next phase of this blowout, with capitulation around the corner:

Onto currency markets where the lack of volatility is striking with the USD falling against most of the majors, but only relatively speaking. Euro had a bounce back following the Monday morning gap with another spike up to the 1.12 handle but note that four hourly momentum is not yet positive with the high moving average not under threat yet, so this looks temporary:

The USDJPY pair gapped down yesterday morning and has fallen further, back to former resistance the 105.50 level and now in a holding pattern with momentum still positive in the short term. The usual correlation with other risk assets seems broken with not as much Yen buying as expected during times of crisis, but this could easily accelerate here, so watch the 105 handle to come under threat:

The Australian dollar however is not immune with further falls overnight with a dip below the 61 handle and into the 60s for the first time in over a decade. The trajectory here is slowing down though with an inversion of short term momentum possibly pointing to some stability if not an outright bottom, but its all about commodity prices with its sister currency, the Loonie also at a record low vs USD:

Oil remains the problem child with an outright breakdown in price overnight with both Brent and WTI crude falling more than 15% in a single session with the latter moving well below the key $30 level. The daily WTI crude chart was showing a tight bunch up of price around the $30-33USD per barrel level but the Fed stimulus misfire and continued OPEC+ naffery is sending prices to new record lows. Momentum remains extremely oversold but there’s no upside signs here:

Finally to gold, which continues to have an epic ride with the weekly megaphone pattern coming to fruition and then some with another wide ranging session overnight that saw it fall nearly $100USD per ounce down to the low $1400’s before coming back to just above the $1500 level, wiping out all concerns of an actual safe haven status for the shiny metal. No one wants it and that’s clear:

 

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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