Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Stock markets continue to diverge from economic reality with Wall Street lifting higher despite rising civil unrest and growing tensions with China over Hong Kong and other trade disputes. The latest ISM manufacturing survey had some glimmer of hope within but still showed extremely weak conditions across the US as unemployment ravages the country. The USD is down to a three month low with all the majors surging again while US Treasuries yields lifted slightly.

Looking at share markets in Asia from yesterday’s session where in mainland China, the Shanghai Composite was up more than 2% in reaction to the non-reaction from the US on trade disputes with Hong Kong, closing at 2915 points, while the Hang Seng Index gapped over 3% higher to 23735 points. This brings price well back above previous firm support at the 23300 point level, after briefly toying with breaking back down to the March lows, but not yet out of the woods:

Japanese share markets also had a solid day despite a stronger Yen with the Nikkei 225 up another 0.8% to 22062 points. The daily price pattern continues to have all the hallmarks of a blowout as momentum is extremely overcooked so watch the trade in Yen for signs of a probable reversion back to the high moving average closer to 21300 points or so to take some heat out of this:

The ASX200 popped back above the 5800 point level with a 1% rise to close at 5819 despite the Aussie dollar reaching for the stratosphere. SPI futures are up a modest 10 points to start today’s session with daily price action looking to beat the previous session highs and get towards the 5900 point level. There are a few releases today that will give a glimpse into Q1 GDP that could rattle the market however:

European markets remain positive throughout as the northern summer and a new month begins with German markets closed due to a long weekend, the rest of the continent rose between 1 nd 2% higher. On its return tonight, the DAX is likely to make a new daily/weekly/monthly high as its traders also want to get back to the over-extended and over-valued levels before COVID-19:

Wall Street was firm across the board with the headline Dow up 0.3% while the broader S&P500 finished nearly 0.4% higher to the 3055 point level. This market is determined to head back to its previous level at the start of the year at 3400 points and it seems nothing will stand in its way:

Onto currency markets where the Euro finished this morning above its Friday session highs at the 1.1140 level, but seems to be running out of puff as it awaits tonight’s EZ wide PMI prints and the return of German traders. I’m still watching for a potential swing below the low moving average at the 1.11 handle in the short term:

The USDJPY pair remains volatile after its directionless start to the trading week with the four hourly chart still not providing a clear picture. Momentum is tracking downwards with the lack of any new session high since Friday night, which is part of an overall USD weakness across the majors. Resistance overhead at the 108 handle remains obvious:

The Australian dollar is going to the moon it seems after being extremely overbought, has now breached the 68 handle as part of a general risk on and anti-USD mood. Momentum is doubly overbought again with probability saying it should revert back to the high moving average or the full band shortly, but never discount the possibility of more upside:

Oil prices maintained positive momentum as the OPEC+ meeting looms again with Brent futures up through the $38USD per barrel level as it continues to reject the post-breakdown resistance level. I’ve been saying for awhile here that I wouldn’t be surprised at another blowout that could even hit the $40 level before all the longs are exhausted in this move, but watch out for a violent inversion:

And, finally to gold which starts the week with a solid gap higher and held onto those gains overnight, finishing at the $1739USD per ounce level. The short term inversion below $1700 due to the lack of further buying support looks over and price is ready to return to the previous highs as very firm support below shows:

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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