Macro Morning

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Lunatic RBA discovers quantitiave easing drops Australian dollar


By Chris Becker 

Another sour night on overseas markets with Federal Reserve Chair Powell giving a reality check on the economic impact of COVID-19, causing a selloff across Wall Street as Chinese/US relations also took a dive. Currencies also bore the brunt of the volatility, although gold stayed true and fair to remain above $1700USD per ounce as Bitcoin accelerates back towards its pre-weekend slump highs as more and more central bank governors get behind government debt monetisation.

Today’s Australian numberwang aka labour force survey aka throwing dart at a barndoor and guess the unemployment figures will be the highlight on the economic calendar.

Looking at share markets from yesterday where in mainland China, the Shanghai Composite was up a little over 0.2% at 2899 points, while the Hang Seng Index almost finished with a scratch session but ended up slipping nearly 0.3% to 24180 points. Considerable resistance at 24800 points is pushing the market back down to its recent lows with the potential to break below daily support at 23200:

Japanese share markets were the worst performers with the Nikkei 225 closing 0.5% lower to 20267 points. Futures are looking downbeat with continued rejection of overhead resistance at the 20300 point level as the market moves in tandem with other stocks falling more selloffs on Wall Street overnight. Support at the 19400 level must hold here:

The ASX200 fell over 1% at the open and looked like staying there until an afternoon buying frenzy saw it eventually close 0.35% higher at 5421 points. SPI futures down over 1% with overhead resistance at the 5550 level still remaining far too strong to beat. Watch for the recent lows at 5300 to come under pressure here again:

European markets were the weakest overnight, the FTSE losing over 1.5% to take back its recent gains while the German DAX slumped more than 2% to close at 10542 points. The daily chart shows price rebuffing the key resistance levels, rolling over and heading back to the previous weekly lows with the 10,000 key psychological support level the one to watch:

Wall Street had yet another reality check and sold off across the board with the headline Dow off by 2% while the S&P500 finished 1.7% lower at 2820, as the daily chart hovers close to a significant breakdown here. Overhead resistance at the 3000 point level is far too strong, so I’m watching for a follow through down to the 2800 level soon:

Onto currency markets where the volatility continued overnight with USD weakening initially and then reversing against the majors, although Pound Sterling remains decidely in a downward trend as the BOE openly contemplated buying government bonds. Euro had another surge through trailing ATR resistance at the 1.0850 level but was pushed back down strongly later in the session by Fed Chair Powell’s comments, taking the union currency back towards the 1.08 handle:

The USDJPY pair was relatively benign, hovering around the 107 level with a small move below on temporary USD weakness before settling at that level this morning. Momentum remains positive on the four hourly chart but price looks weak here as Yen buyers continue to push the pair back to its mid point of control, so watch for another break below the low moving average:

The Australian dollar had yet another violent whipsaw overnight, snapping above the 65 handle and then back to its intraweek lows at 64.30 or so, looking very weak here going into the Asian session. Today’s unemployment is likely to add to the volatility so the best trade might be to step aside until the wide resistance/support levels are broken either way:

Oil prices were relativeyl quiet overnight with WTI unchanged while Brent crude slipped a little further below the $30USD per barrel level failing to make a new daily high again. The key area to watch remains former trailing ATR daily resistance and the downtrend line from the March gap down event.The inability to get above this trendline is telling, so watch the low moving average which must remain intact:

Finally to gold, which after absorbing the US CPI print has also had no inflationary concerns about the soft PPI print or Powell’s testimony with yet another low volatility session pushing the shiny metal a few more dollars above the $1700USD per ounce level. The daily chart still looks promising but we need a breakout above the high moving average and more likely, resistance near $1730 before re-engaging:

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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