Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

It’s all about the stimulus with stock markets lifting overnight in the wake of combined fiscal packages from various governments to offset the economic cost of the coronavirus impact. Wall Street lifted the strongest, up nearly 6% across the board but commodities continued lower, dragging the Aussie dollar with them to a new 17 year low, breaching the 60 cent level. It’s likely to be another short covering day here in Asia, but caution reigns on any bad news events.

Looking at Asian share markets yesterday,  the Shanghai Composite was down significantly before the lunch break but recovered somewhat into the close, off by only 0.4% to 2779 points while the Hang Seng Index lifted at the close, but punched through for a 0.8% rise, finishing at 23263 points. This puts it a slightly better position but not yet above the previous up session and needs to get back above 24000 points before indicating a bottom pattern, with momentum still well oversold:

Japanese share markets diverged with the headline Nikkei 225 unchanged while the TOPIX advanced 2.5% as the decline in the USDJPY throughout the session made for a mixed finish. Futures however are looking a lot better given the selloff in Yen and the rise of Wall Street with the 17000 point level likely to be breached today, but again, this is very early days:

The ASX200 was keeping everyone on edge with a near 6% rally! This is nuts, but normal nuts if that makes sense, as it closes nearly 300 points higher to 5293 as traders await the RBA to do something soon. SPI futures indicate a flatter open today with price looking to advance back up to the 5700 points level – i.e the previous step down, so watch daily momentum here for a possible swing:

European markets finally lifted off the deck after the Asian session with the broader Eurostoxx 50 gaining over 3% while the German DAX finished only 2.2% higher but its better than previous sessions! Again, another equity market ready to leap higher on hope, but there’s still no indication here of a real bottom, with daily momentum still extremely oversold. That can change in one short covering session of course::

Wall Street was the big improver overnight but don’t get carried away! The S&P500 closed 6% higher to 2529 points, only clawing back half of the previous daily rout and still looking extremely weak here on the daily chart. I still contend there’s more downside here with the uncle point very close below:

Onto currency markets where volatility is starting to lift with the USD making a comeback, with Pound Sterling down to a new yearly low while Euro fell back below the 1.10 handle as more fiscal measures and uncertainty around bond markets continue to weigh. This is a new stepdown and looks like following through tonight:

The USDJPY pair however finally got out of its temporary funk with a lift up towards but not above Friday’s closing point, finishing this morning at the 107.60 level.   The usual correlation with other risk assets is getting back on track with more Yen selling and momentum is finally in a more sustainable level, but I’m still cautious here until new daily/weekly highs are made:

The Australian dollar suffered the most as commodities remained in freefall with another drop below the 60 handle that almsot stuck, getting down to the 59.50 level at one point. Great news for exporters – if they can survive this recession:

Oil remains a major problem with yet another selloff overnight with both Brent and WTI crude falling significantly with the latter moving to below the $27USD per barrel level after abandoning the $30 key level previously. The daily WTI crude chart was showing a tight bunch up of price around the $30-33USD per barrel level but with momentum remaining extremely oversold there’s no upside signs here:

Finally to gold, which after an epic ride following the weekly megaphone pattern saw another wide ranging session overnight that saw it finally finish at the $1528USD per ounce level, still below the previous December-February support level. Gold is lagging equity markets here and could suffer another fall soon if it doesn’t rally back above the $1560-1580 level:

 

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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