Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Some calm returned to risk markets overnight, but its all relative, with oil shooting 20% higher on shutdown rumors from an already overly depressed level. Stocks did well in Europe and stumbled a little higher on Wall Street while in currency world, its still all about the King, as gold slumped to a new monthly low alongside Euro, Pound Sterling and the commodity proxies although Aussie had a little (sic) blip higher on the RBA move yesterday.

Looking at Asian share markets yesterday,  where the Shanghai Composite was off by nearly 100 points before the lunch break but then recovered a little at the close to finish 1% lower to 2702 points. The Hang Seng Index fell much sharper, down 2.7% to 21709 points with the daily chart showing no bottom in sight. The daily chart remains overextended and at a juncture here at the monthly trendline from the 2008 bottom:

Japanese share markets continue to stumble with the Nikkei 225 losing 1% to 16552 points. Futures are pointing to some stability today and while the usual correlation with Yen has broken down, the rally on Wall Street combined with the last several sessions of no new lows may give rise to a swing trade higher here – watch the divergence in momentum:

The ASX200 was the worst performer, down 3.4% to close at 4782 points, now off by nearly 23% year on year.  SPI futures are up over 100 points or more than 2% as volatility continues, but the market needs to not make any new lows if it wants any chance of swinging higher from here:

European markets had a green night, but not off the charts as volatility quietens a touch, the Eurostoxx 50 up nearly 3% while the German DAX finished exactly 2% higher at 8610 points. Despite the rally, there’s still no indication here of a real bottom, with daily momentum remaining oversold and price action not yet pointing to a cessation of lows, although there is some deceleration creeping in:

Wall Street had a similar, if somewhat diverse response with tech stocks leading, the NASDAQ up 2% while the Dow was only up 1%, the S&P500 closed just 0.5% higher to 2409 points. Another market trying to put some brakes on as the falls decelerate a little, but the four hourly chart is still bearish – flip it upside and would you sell it? Going to need a spectacular move higher here before the rest of the risk complex falls in line:

Onto currency markets where volatility continues to climb as King USD grows ever stronger with both Pound Sterling and Euro falling again to make new record lows. The union currency fell below the 1.07 handle in a sharp retracement, with momentum not changing direction at all here:

The USDJPY pair is still providing its usual risk proxy status with yet another rally overnight pushing it above the 110 handle. The nominal double top bearish pattern that had formed on the four hourly chart has been pushed aside as Yen selling accelerates:

The Australian dollar is coming back, all is well! Well no, there was the inevitable bounceback after the RBA went QE yesterday and cut rates to an historic low, with a 200 pip blip higher that then moderated in late session trading as all undollars fell. This is probably the Martin Place deadcat bounce with the next support level not that far away at just below 50 cents at the 2000 low:

Oil put on a surge overnight with both Brent and WTI crude up over 20% with the latter breaching the $28USD per barrel level briefly before settling just below the $26 level. The daily WTI crude chart is still showing a race to the bottom with momentum remaining extremely oversold which means there’s a lot of volatility ahead, including upside but can only really be captured intraday for now – I was using 30 minute charts overnight but it’s not the feint hearted:

Finally to gold, which is still catching up to the big falls in equity markets and the overall de-risking with another selloff overnight in the wake of a much stronger USD. The shiny metal fell down to the December 2019 levels at $1466USD per barrel, although these falls look like they are decelerating. Momentum remains well oversold but watch for a potential swing higher:

 

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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