Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

The return of Wall Street sent risk sentiment higher overnight as stock markets continued their push to return back to normal overinflated bubble like status before the COVID-19 pandemic. The USD took a big hit against the majors with Pound Sterling back to a two week high and the Australian dollar pushing a three month high well above 66 cents. Late night comments by Trump about potential sanctions against Ghyna are potentially making for a wobbly start on Asian share markets however.

Looking at share markets from yesterday where in mainland China, the Shanghai Composite closed 1% higher to 2846 points, with the Hang Seng Index gapping over 2% higher to fill in a lot of the rout from Friday, closing at 23437 points. This takes it back above previous firm support at the 23300 point level, signalling everything is fine in the rogue island for now but price needs to quickly get back into that rectangle pattern or this could rollover again:

Japanese share markets continued their very good start to the week with the Nikkei 225 closing 2.5% higher to 21217 points. The daily price pattern has been the most promising of all risk markets for sometime now, having cleared resistance and ready to get back to the pre-virus highs, but watch for a potential blowout here as momentum gets overcooked:

The ASX200 was the big performer again with all the shorts seemingly wiped out, pushing the market up nearly 3% to close at 5780 points. SPI futures are down nearly 50 points or 1% despite the firm rally on Wall Street overnight as this breakout becomes well overbought in the short term with the potential for profit taking during today’s session:

European markets kept up the positive mood into further gains across the continent as the German DAX finished another 1% higher at 11504 points. Sentiment has obviously cleared its throat s and is ready to re-engage this rally as momentum continues to be nicely overbought:

Wall Street reopened after the Memorial Day weekend, with futures translating into physical gains across the board, with the Dow Jones taking the headline big hit higher, the broader S&P500 managed a 1.2% lift to 2991 points. A return to the 3000 point level seems inevitable with last night’s close above resistance at the 2970 point level not needing much more confirmation:

Onto currency markets where the recent USD strength has reversed sharply on the return of US/UK traders with Euro bursting out the gates to almost reach its previous weekly highs just below the 1.10 handle. There is considerable resistance at that psychological key level so keep an eye for a reversion to the mean trade back below the high moving average at least tonight:

The USDJPY pair fell back surprisingly as all USD positions (except gold) were wound back on the resumption of US and UK trading, with the pair pushed well below the 108 handle. This shows an inability to return to its previous early week highs with this consolidation phase above daily and four hourly ATR support possibly turning into a reversion to the late April/early May lows.  Momentum has flipped to negative on the four hourly chart so watch the 107.30 area for signs of a breakdown:

The Australian dollar was the stunner overnight after a staid start to the week, bursting up through the 66 handle to a 3 month high. Support has been strong at the low 65s and resistance at last week’s intraweek high at the 66.20 level was pushed aside firmly. Price action on the hourly/four hourly chart looks way toppy with the potential for a short term swing back down to 66.20 or so:

Oil prices are still pushing higher alongside stocks with Brent crude up another 1% to be just above the $36USD per barrel level as it starts to push up against its post-breakdown resistance level. Momentum is still clearly behind oil prices, and I still 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 flatlining during the recent pickup in risk taking has been abandoned as a safe haven for the time being, falling to a new weekly low at the $1710USD per ounce level.  I have been warning of a potential short term inversion that could go below $1700 due to the lack of further buying support (everyone is buying stocks instead) but there should be another engagement for a leg higher in the medium term – IF support hold at the April lows:

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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