Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Risk markets continue to transmit the message that the pandemic is completely over, business is back as usual, that there are no macro structural issues at all and earnings are going to be tremendous! European markets surged despite record low contractions in service PMIs overnight as unemployment numbers stabilised, while in the US the private unemployment figures were not as bad as expected with their ISM services print also stabilising. Crisis over – buy stocks!

Looking at share markets in Asia from yesterday’s session where in mainland China,  the Shanghai Composite finishing with another small lift higher to 2927 points, while the Hang Seng Index rose 1.3% to 24325 points. This takes price almost back to the previous sideways highs from April and still well above previous firm support at the 23300 point level as traders completely discount the trade problems associated with the takeover of the once free territory. A breakout above 24600 would signal a new rally:

Japanese share markets were the standout again with the Nikkei 225 up another 1.3% to 22325 points, continuing its epic, extremely overbought condition, helped along by a weaker Yen. The daily price pattern remains an obvious blowout as momentum is extremely overcooked with all the rules of probability pointing to at least a pause if not some profit taking sometime soon:

The ASX200 had the best session of them all as traders celebrated the recession news with a near 2% lift to 5941 points as the Aussie dollar also went gaga. SPI futures are up 70 points as the market wants to crossover the 6000 point barrier. Recessions are awesome for stocks doncha know! Momentum remains well overbought here but there’s no short positions left as FOMO takes hold:

European markets are going absolutely nuts on the upside with the German DAX up another stonking 3.8% to a new post COVID 19 high at 12487 points. Extremely overbought and extremely over-extended but nothing seems in its way – this is a clear KC signal that there’s going to be some profit taking anytime soon:

Wall Street is obviously loving all the fiscal, monetary and authoritarian support its getting to juice stocks back to their pre-COVID19 high, discounting all risks along the way as the S&P500 finished 1.4% higher to 3122points. This market is determined to head back to its previous level at the start of the year at 3400 points with momentum now at well overbought levels:

Onto currency markets where the dominant weak USD meme continued overnight as the Euro finished above the 1.12 handle and made another monthly high. Price action continues to defy gravity and while I’m still watching for a potential swing below, momentum remains only slightly overbought and sustainable to the upside:

The USDJPY pair continued its big move higher following yesterday’s breakout but hit another level of resistance just below the 109 level overnight. The target for this move is the April 109.40 level but like other majors I’m watching for a potential move lower first as risk plays catchup:

The Australian dollar finally had a breather overnight from an extremely overbought condition, almost breaching the pre pandemic level (upper black horizontal line) before easing off and stabilishing just above the 69 handle. Momentum is now reverting with a potential rollover building, but this requires a proper break below trailing ATR support on the four hourly chart at the 68.30 level which remains far away:

Oil prices were a little flat but maintained their three month high with Brent futures remaining just above the $39USD per barrel level as it continues to reject the post-breakdown resistance level. This blowout up to the $40 level is not surprising, but is not being supported by anything but speculation so I continue to watch out for a violent inversion:

And, finally to gold, the only risk asset unable to turn any of this monetary madness into any meaningful gains, finishing substantially lower overnight to below just below the $1700USD per ounce level. The inability to breach the former highs at the $1760 level was telling here and has resulted in a breach of the low moving average as we head towards key support at the $1690 level that held throughout April:

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!

Comments

  1. boomengineeringMEMBER

    Thought I was going to hop on the bandwagon of Govt handouts when a multi media production company asked for a quote on a support beam for lighting sound etc in a hall due to eligibility of a grant . Wow what a waste of money these govt looneys just give away money spasmodically to frivolous causes. How the hell will that help Australia, akin to nail salon getting a handout.
    Turns out it’s a PITA which has to be council approved.
    Didn’t really waste my time as he was a colorful character who used to be Kerry Packers mate overflowing with stories, a stand up comedian to boot, highly qualified in electronics and laser security.

  2. Lord Winchester EntwhistleMEMBER

    JobSeeker arrived for Lady Entwhistle this morning. Much merriment and mirthery was had by all, what!