Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

The Trading Week ended with a whimper on Friday night on Wall Street as tensions over the US/China relationship continued to simmer over as the rhetoric ramped up going into the CCP’s national congress. Meanwhile, the long weekend caused many traders to pare their positions with US stocks ending mixed, and Treasuries basically unchanged alongside a still strong USD that kept most of the major currencies depressed again. The latest initial jobless claims figures were muddled a bit, adding to the lack of direction, while the continued lack of reduction in coronavirus cases around world – particularly the “strong man” failures like Russia, Brazil and the USA – is keeping risk sentiment lower than expected.

Looking at share markets from Friday’s session where in mainland China, the Shanghai Composite closed down nearly 2% lower to 2813 points having wiped out all of this month’s gains as concern over the trajectory of the Chinese economy gathers apace. Meanwhile the Hang Seng Index fell over 5% in a big rout to below 23000 points as a clear breakdown of what was firm support at that level, turning this sideways move into something more interesting. This takes price action almost down to the long held trendline and could be presaging a wider rout:

Japanese share markets were the relative best performers, with the Nikkei 225 closing 0.8% lower to 20388 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 flat start to the week but it must be said this price pattern looks promising on the upside for now, watch the lower trendline which must hold at 20000 points:

The ASX200 fell back below the 5500 point level in a mild selloff that gathered pace later in the session, falling 1% to 5496 points and putting breakout theories to the test as the economy re-opens. SPI futures are up over 1% in response to the mixed Wall Street session as optimism gains foot again – note the four days of price action all above recent resistance at the 5500 point level which suggest a lot of buying support to hinge into a new leg up:

European markets were unable to gain traction at all with flat or minor lifts across the continent as the German DAX finished dead flat at 11073 points. Sentiment remains mixed here after being cavalier going into last week’s trading session, and again, another market poised to breakout and get going once it pushes aside the once strong overhead resistance. Support at 10500 points must hold this week:

Wall Street was generally positive but not across the board as the Dow put in a flat session while the NASDAQ lifted 0.4%, the S&P500 only finished 0.2% higher at 2955 points. While a return to the 3000 point level seems inevitable it still requires a solid daily and weekly close above resistance at the 2970 point level:

Onto currency markets where the recent USD strength was only marginally flipped back on Friday night with Euro finding a modicum of support at the 1.09 handle, but only just. The pullback I was expecting is morphing into a reversal and could have legs here under that level, gravitating back to previous support at the 1.075 to 1.08 area:

The USDJPY pair was relatively steady, again slowly pushed below the 108 handle and unable to return to its previous early week highs as it continues its consolidation above daily and four hourly ATR support.  Momentum remains positive on the four hourly chart but only barely as safe haven buying of Yen temporarily keeps this pair just on its previous weekly highs, so watch the high moving average for a breakout:

The Australian dollar was pushed down to the 65 handle in the London session before end of week squaring up saw a mild finish at the 65.40 level. Support should be strong here but having breoken through the previous weekly resistance levels at the 65.70 area, there is potential for a reversal going into this week. Again watch on the lower timeframes to see the Pacific Peso come under pressure:

Oil prices are still riding higher, but only just Brent crude was pushed around to finish just above the $35USD per barrel level as it again comes up to its post-breakdown resistance level.  I still contend we are near the end of this move but wouldn’t be surprised at another blowout that could even hit the $40 level before all the longs are exhausted:

And, finally to gold, which after an uninspiring week, regained some minor strength to finish up on Friday night at the $1734USD per ounce level.  Not setting the world on fire, but still looking firm here on most timescales, but in the short term the lack of buying support could see a short term inversion below $1700 before another leg higher in the medium term:

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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