Macro Morning

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By Chris Becker 

It’s getting tiresome but predictable as sentiment continues to swing from hope to caution as US stocks pulled back due to more earnings guidance being muted or reduced once more, particularly tech stocks and big caps. While the global COVID-19 new cases continue to drop, the US is still far from flattening their curve which is adding to the lack of confidence. The USD was slightly lower against the majors with gold returning above $1700USD per ounce while other commodities were mixed as oil saw a happy return to a positive blip higher for once.

Looking at Asian share markets from yesterday where the Shanghai Composite finished flat after an early tripup that saw it down nearly 1% earlier, finishing 0.2% lower at 2810 points while the Hang Seng Index had a much better session, finishing 1.2% higher to 24575 points, as daily price action bounces off the recent daily lows in attempt to break the the previous highs. Daily momentum has switched to a positive mood here with resistance overhead (short black line) at the 24600 point level yet to be breached, but getting ready for a breakout:

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Japanese share markets stalled out with the Nikkei 225 closing a handful of points lower to 19711, still shy of the psychologically important 20000 point level . The daily chart is now in a strong position to breakout here, although I note the bearish rising wedge pattern is firming up properly now, as resistance at the 20000-20200 area remains quite firm and needs to be broken soon:

The ASX200 also lost some ground in a gyrating session, up nearly 1% at the open and down the same towards the close, it eventually finished only a few points lower at 5313. SPI futures are up about 0.4% or so despite the mixed lead on Wall Street, so we could see a move back towards the previous highs if risk correlation holds between the equity markets but this looks like a sideways consolidation with firm-ish support at 5000 points still holding:

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European markets were firm across the continent with the German DAX closing 1.3% higher to 10795 points almost breaking above the previous daily and weekly highs. The daily chart still shows resistance overhead but as I said previously with the low moving average and the psychologically important 10000 point level intact, daily momentum is picking up and getting ready for a new breakout:

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Wall Street however stumbled again with the NASDAQ dragging the chain the most, falling over 1.4% while the S&P500 only finished 0.5% lower to 2863 points, also unable to break through its previous highs. The daily chart ostensibly shows a market ready to roar ahead but we could be seeing the start of a bearish double top pattern here if it can’t break through staunch trailing ATR resistance at the 3000 point level:

Onto currency markets where volatility around USD has not yet fully subsided with Euro briefly breaching its trailing ATR resistance line on the four hourly chart in a fakeout move, but was again pushed back to a point of control just above the 1.08 handle. The medium term downtrend remains intact but the union currency is ready for more upside here if it can breach that 1.0850 midpoint and hold on to it overnight:

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The USDJPY pair remains depressed following its Monday morning droop, this time breaking down proper below the 107 level as the BOJ and Japanese government signalled more deflationary stimulus actions that supported further Yen buying. Momentum readings are quite oversold but the high moving average is nowhere near under threat here with another short term move to the 106 handle to be expected:

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The Australian dollar was unable to make good on its start to the week surge with a stall out here at the 65 handle overnight, but its yet another new weekly high. I said yesterday that there is a possibility of a return to the former highs from mid February at 66.50 or so, but short term momentum is way overbought and we could see a small reversion:

Oil remains extremely volatile with the Brent contract eventually finishing at just above the $23USD per barrel. That daily candle indicating a possible bottom – a morning star pattern – has not yet translated into a rollover here as price tries to head up to resistance at the $26 level but momentum remains strongly negative:

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Finally to gold, which continues to slowly deflate after a big surge higher above the $1700USD per ounce level, but steadied overnight of finish at $1705USD per ounce. The daily chart continues to firm here in the short term to catch up again with the longer term technical picture which is to keep advancing:

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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)

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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

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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!