Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Risk sentiment just can’t seem to get above the current elevated levels on stock markets around the world and are snaring back to reality everytime a macro issue raises its head. US stocks fell back nearly 1% overnight on US/China tensions and the rising coronavirus case load, with the USD reasserting itself against the major currencies and gold falling back from its recent highs.

Looking at share markets from yesterday’s session in Asia where in mainland China, the Shanghai Composite sold off sharply going into the close, finishing 0.5% lower to 2867 points, with the Hang Seng Index eventually doing the same to close at 24280 points. A cursory look at the daily price chart still shows a consolidation pattern with no new breakouts as yet, and although momentum remains on the positive side its tenuous if this lack of risk sentiment continues – watch support at 23400 closely:

Japanese share markets were also unable to advance, with the Nikkei 225 falling 0.2% to close at 20552 points. This keeps it just above the previous gap down level from the February/March lows but in line with other risk markets, futures are suggesting a rollover back to the start of the week position as overbought momentum rolls over:

The ASX200 fell the most in the region after being up on the open and looking ready to confirm its breakout with investors getting nervous here with a 0.4% fall to 5550 points. SPI futures are down around 10 points or  response to the falls overnight, and we could see a proper reversion as nerves extend into the weekend gap:

European markets were unable to look past the strong Euro and the very weak PMI prints with broad selling and return to the mid/early week starting points, as the German DAX up 1.3% to 11223 points. Sentiment is morphing into exuberant here with yet another market poised to breakout and get going once it pushes aside the once strong overhead resistance:

The latest initial jobless claims didn’t help steady nerves on Wall Street as it remains poised here to breakout and return to the pre-virus (and stupidly high) levels as the S&P500 finished 0.8% lower to 2948 points. While a return to the 3000 point level seems inevitable it will require a solid daily and weekly close above resistance at the 2970 point level:

Onto currency markets where the volatility flipped back in the USD favor across the board  – and the arse falling out of Bitcoin too boot – with the previously overbought Euro finally tripping up but all relative as it fell back to the low 1.09’s. I was looking for a pullback previously, and finally some price action got near the low moving average, but not closing below that level shows this may only be temporary:

The USDJPY pair was relatively steady, remaining below the 108 handle obviously and unable to return to its previous early week highs as it consolidates here around the previous weekly high.   Momentum remains positive on the four hourly chart with the potential for a return above the previous session highs, so watch the high moving average for a breakout:

The Australian dollar is echoing stock market levels with a failed breakout here above the previous weekly highs at the 65.60 level as price consolidated and momentum inverted. Note that support at 65.50 level is still pretty strong and where I’d watch on the lower timeframes to come under pressure:

Oil prices are still riding higher, but only just as second order momentum is showing there’s not much upside left. Brent crude pushed only 1% higher to just below the $36USD per barrel level as it again comes up to its post-breakdown level.  I still 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 after a small melt higher after its recent breakout to a new yearly high, has fallen back as USD gains some strength, falling to the $1727USD per ounce level overnight.  I’m still watching for a bigger breakout above the high moving average but the lack of buying support is really building here so we could see a short term inversion below $1700 first:

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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