Macro Morning

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Macro Afternoon

By Chris Becker 

Friday night saw a relatively good end to a hectic week across risk markets with European stocks playing catchup while Wall Street lifted slightly, its optimism about economic life opening contained somewhat by the growing China/US trade dispute, nevermind the pandemic issues. Gold continued its significant breakout as all central banks seem hell bent on heading to negative rates while currencies were relatively calm, save for Pound Sterling which nosedived into a post Brexit yearly low.

Looking at share markets from Friday’s session where in mainland China, the Shanghai Composite put in a scratch session to finish the week out at 2868 points, while the Hang Seng Index also struggled, down 0.2% to close out a forgetful week at 23797 points, holding just above the recent daily lows as resistance proves too strong overhead. This level is pushing the market back down to its recent lows with the potential to break below daily support at 23200, but note that daily momentum remains positive but only just:

Japanese share markets bounced back slightly after the reversal on Wall Street with the Nikkei 225 closing 0.7% higher at 20037 points, getting back above key support at 20,000 again. Futures are looking a bit staid however, with continued rejection of overhead resistance at the 20300 point level there’s only a small potential for a follow through above as support at the 19400 level  remains firm here:

The ASX200 was the standout and lifted over 1.4%, putting a positive spin on the week’s trading, closing at 5404 points. SPI futures are pointing to a solid start to the week, up over 0.5% on the positive mood, but I continue to note that overhead resistance at the 5550 level still remains far too strong to beat:

European markets flipped to the stronger side, with the FTSE up 1% on the lower Pound while the German DAX advanced slightly further, closing 1.2% higher at 10465 points. It’s all relative however as the daily chart still shows price rolling over and seemingly heading back to the previous weekly lows in a weak sideways pattern. The 10,000 key psychological support level is the one  to watch here alongside daily momentum for signs of a capitulation:

Wall Street had another late surge that again escaped a breakdown below key support with the S&P500 only finishing 0.4% higher at 2863 points, with the daily chart showing continued pressure to breakdown below the recent daily lows. Overhead resistance at the 3000 point level is far too strong, but don’t discount the stupidity to push this market higher:

Onto currency markets where the volatility abated somewhat with Euro in a wide trading range before settling to finish just above the 1.08 handle. Going into this week, the union currency must hold support at the recent lows above 1.0790, and may attempt a breakout above the 1.0870 level:

The USDJPY pair was unable to relaunch higher, bouncing off the four hourly ATR support level briefly but without conviction to finish the week just above the 107 handle.  Momentum remains positive on the four hourly chart but the price pattern is one of consolidation with firm support below the uncle point going forward, watch for a potential breakout above 107.40:

The Australian dollar was unable to gain traction with four hourly momentum and the inability to get above the high moving average pointing the way to a rollover back down to the low 64’s against USD. It will start the week in a weak position here, just above the tentative trendline from the April lows, where I expect another inversion here as momentum remains negative:

Oil prices continued there own bounceback on Friday with Brent crude lifting well above the $33USD per barrel level and ready to close out the recent bottoming pattern here.  This bullish move highlights the key area to watch at the downtrend line from the March gap down event, with the terminus still at the $35 level:

Finally to gold, which after absorbing so many economic catalysts, is now breaking out to new monthly highs with a surge up towards the $1750USD per ounce level on Friday night. The  target is the 2011 highs at $1825 or so – can it make it?

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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