Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Overnight risk markets took the stimulus ball and ran with it, ignoring the growing COVID-19 virus caseload and deaths, particularly in the heart of the global economic machine, the USA. Quarter and month end rebalancing may also be playing a part, but it seems like another short covering bounce as the economic reality of the crisis has not yet evaporated! Gold and currency markets were relatively stable as USD was largely unchanged, while oil prices slumped on the back of ridiculous Saudi production increases.

Looking at Asian share markets from yesterday, where Chinese stocks were largely acting the same with the Shanghai Composite down just under 1% to 2747 points while the Hang Seng Index was off a bit more, stumbling at the close to finish 1.3% lower at 23175 points, still unable to keep above above its high moving average on the daily chart. This keeps it in swing mode only and while the daily chart is still showing firming support I still contend this will continue to stall here with a flop below the low moving average at 22600 points the uncle point:

Japanese share markets fell the sharpest in the region, the Nikkei 225 about to close 3% lower before a late surge at the close saw it finish only 1.5% lower to be just above the 19000 point level, not helped by a stronger Yen. The daily chart shows price bunching up here at that 19000 point level, providing a good launch point to tackle the next resistance point at 20000 if this swing continues:

The ASX200 was the only market to advance, as the fear of missing out and delusion spreads wide and sunder, helped by the epic third stimulus package from Scomo et al, with the market eventually closing exactly 7% higher at 5181 points. SPI futures are up another 1% this morning and price is also bunched up here at the 5250 point level, ready to launch up towards 6000 – or is this a month/quarter end bull trap?

European markets had solid sessions although the German DAX started off poorly before recovering to finish 1.9% higher to 9815 points. The daily chart of the DAX exhibits a classic dead cat bounce with the psychologically important 10000 point level the area to beat, but I’m still watching the obvious low moving average support level at 9000 points proper:

Wall Street can’t be held back, swallowing the “good outcome if only 100,000 Americans die” narrative from the White House with all three bourses launching over 3% higher, taking back their Friday losses. The S&P500 eventually closed 3.3% higher to 2626points. The daily chart shows the return to the 2600 points level, equating to the monthly/yearly 2008 uptrend line looks set to be ephemeral with the dead cat now pointing its paws to the heavens:

Onto currency markets where volatility has fallen significantly with USD reasserting itself slightly, the Euro retracing a little to finish well below the 1.11 handle. The swing trade that started last Monday has run out of puff here at the weekly highs, with overbought momentum putting in a minor retracement that could be a consolidation before another uptick, so watching the 1.11 level closely:

The USDJPY pair has paused in its breakdown with some oscillation around the 108 handle after not experiencing a wild Monday morning gap as per usual. Normally, the current price action should be ominous for risk assets, but the long running correlation has broken down and with momentum way oversold there is a small potential for stability here:

The Australian dollar really wants to advance but is not finding a lot of upside activity as it melts slightly higher to finish at the 61.70 level this morning.   Again, commodity prices continue to discount this reality and the Pacific Peso should be falling back to the 60 or even 59 level if oil and iron ore keep falling, but price remains nicely overbought and momentum still on track – watch trailing ATR support closely:

Oil remains the market to watch with both Brent and WTI flopping to new lows on the open yesterday morning, with Brent in particularly ready to breakdown here if it closes out the week below the $26USD per barrel level:

Finally to gold, which is still holding on to its gains above the $1600USD per ounce level as daily momentum remains steady but I’m still waiting for some consolidation here as price is stuck above the high moving average 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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