Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Last night saw the Federal Reserve take the QE infinity sword out of the sheath, but it was like limp lettuce to risk markets with only a slight fall in USD as bond yields continued to fall to record lows. Wall Street was down 5% at one point as Congress (remember its the opposite of “progress”) was unable to pass a stimulus package, still held in thrall by corporate overlords wanting bailouts instead of providing assistance to the vast numbers of unemployed coming down the pike…

I still contend the major threat from the coronavirus crisis is not here locally, despite the actions of Slomo et al, but the US behemoth that will drag the global economy into a debt deflation imbroglio.

Looking at Asian share markets yesterday, where the Shanghai Composite sold off towards the close to finish 3% lower at 2661 points while the Hang Seng Index was down nearly 5% to close at 21696 points. The daily chart show significant anchoring and possible support just above the 21000 point level with a slight deceleration in selling (despite yesterday!) and inversion of momentum from oversold that could be pointing to a swing soon:

Japanese share markets reopened after the long weekend with a surprising gap higher, the Nikkei 225 closing up 2% to 16887 points. The daily chart shows price deceleration even better here with support at the 15700 point level quite evident. Watch the high moving average at the 18000 point local resistance area closely if you want to catch a dead cat in the air:

The ASX200 had another bad day in response to the Slomo and State shutdowns, as panic grips those under the age of 45 who’ve never experienced a recession or long term unemployment. The index eventually closed nearly 6% lower at 4546 points. In good news however, SPI futures are actually up 40 points or so but its all relative with the technical picture still warning of a return to the GFC lows at 3200-4000 points or so:

European markets had broad losses as well, with the Eurostoxx 50 closing 2.5% lower while the German DAX finished 2.1% lower at 8741 points. The DAX daily chart might be showing a possible bottoming picture with post close futures rallying somewhat in the wake of the new Fed QE programs, but this is very early days yet – watch for no further session lows first:

Wall Street was down 5% at one point, but the Fed punch brought it back – just – with the NASDAQ the best performer, finishing only 0.3% lower while the broader S&P500 eventually closed 2.9% lower to 2237 points. Unless Congress can get its act together (ha!) I can’t see this trip down a series of steep steps stopping anytime soon. But it will be violent on the upside breakout as everyone pours in:

Onto currency markets where volatility was minor in comparison again, with a slight selloff in USD due to the QE Infinity news. Euro is illustrative with another temporary bottom forming here as King USD takes a break, with momentum only slightly oversold now with potential for a short term swing trade higher above the 1.08 handle:

The USDJPY pair lifted into a very short term triple top pattern on the four hourly chart, breaching the 111 handle again but not yet getting back to the February highs as momentum wanes. I’m watching for a short term reversion here but if the 112 handle is broken (top black line) I don’t think anyone will step in:

The Australian dollar is slowly stabilising here helped by the temporary USD weakness with a tight trading range to finish this morning just above the 58 handle and looking set to make some minor upside despite the dreadful macro conditions developing:

Oil had a relatively stable session for a change with the  WTI contract remaining below the $24USD per barrel level. The daily chart shows a nominal bottom forming at the $20 level, with intraday volatility also indicating a potential short term spike higher. However there’s still more downside despite the epic oversold nature of momentum with price having cleared the GFC lows, so be cautious catching this falling knife:

Finally to gold, which is still the most interesting and fun market to trade. Another wild night that saw it breach the $1550USD per ounce level in the wake of the money printing from the Fed, bouncing well off support holding at the October 2019 lows at $1450. This takes it back to the previous support level but does it have the momentum to continue:


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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