Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Here comes the breakout and the second phase in the relief rally as risk markets go ga-ga over a potential vaccine for the coronavirus, while lapping up all the central bank “we will throw the kitchen sink at risk assets” mantra that continues to be rolled out by all and sundry. The biggest move was in oil markets, with Brent up nearly 8% while European stocks launched over 5% higher across the continent as USD retreated against the majors, except gold which all of a sudden is no longer the prettiest flower on show. Expect buying with abandon on the open here in Asia this morning.

Looking at share markets from yesterday’s session where in mainland China, the Shanghai Composite was up 0.2% to start the week almost reaching 2900 points, while the Hang Seng Index closed some 0.6% higher at 23934 points, holding just above the recent daily lows as resistance proves still looms overhead. This level was pushing the market back down to its recent lows with the potential to break below daily support at 23200, but note that daily momentum is about to pickup with futures indicating a surge over 24000 points this morning:

Japanese share markets bounced back with the Nikkei 225 able to keep above the 20,000 point level, rising 0.5% to 20133 points. Futures are looking very solid here with a probable break of overhead resistance at the 20300 point level that will setup for a breakout as support at the 19400 level  remains firm here:

The ASX200 was the standout again, moving some 1% higher to start the week on a very positive note, closing at 5460 points. SPI futures are up nearly 2% in response to the surge on Wall Street overnight, so we could finally see a breakout above overhead resistance at the 5550 level with 6000 points my interim target:

European markets stayed strong and then some, despite a much higher Euro with the German DAX advancing more than 5% in a stonking session, closing above 11000 points. The daily chart is suddenly reengaged and ready for new highs after being in a weak sideways pattern, as momentum picks up and ready to tackle the once strong overhead resistance:

Wall Street is poised here to breakout as well with a solid session overnight across the baord with the S&P500 finishing more than 3% higher at 2953 points taking it right up to trailing ATR daily resistance. The daily chart was showing pressure to breakdown below the recent daily lows but the BTFD crowd have stepped in on any glimmer of good news with overhead resistance at the 3000 point level the area to beat from here:

Onto currency markets where the volatility soared on the back of the vaccine news with USD selling off against the embattled Pound Sterling (up nearly 2 handles!) while Euro launched istelf well above the 1.09 level to make a new weekly high. This breakout above the 1.0870 level maybe too far, too fast initially with a resulting pullback to the previous highs, now support:

The USDJPY pair was able to lift a little higher on the risk taking mood, breaking through the downtrend from last week’s trendline pattern, boosting just above the 107 handle.  Momentum remains positive on the four hourly chart with the potential for a breakout above 107.40:

The Australian dollar was able to make many gains overnight due to the rise in commodity prices and fall in USD, with a big surge back up to last weeks intrasession highs above the 65 level against USD. Momentum is now getting into nicely overbought status and could result in a small pullback before re-engaging for an attempt to beat the previous weekly highs above the 65.60 level:

Oil prices flew out of the gates on the risk taking buying orgy with Brent crude lifting nearly 8% to get well above the $35USD per barrel level in what looks like a classic blowout pattern, now finishing the recent bottoming pattern here.  I contend we are near the end of this move but wouldn’t be surprised at another lurching, overbought and overdone blowout that could even hit the $40 level before all the longs are exhausted:

And, finally to gold, which was sold off slightly as risk assets become the flavour of the day, falling back to the $1733USD per ounce level after being well over the $1750USD per ounce level on Friday night. The target for this breakout is still the 2011 highs at $1825 or so – but can it make it alongside other risk assets ready to go into bubble phase?

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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