Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Risk markets finally returned to some semblance of sanity overnight, with stock markets pausing and eventually retreating slightly from their orgiastic excess all week. Meanwhile risk currencies continued to new highs as the USD weakened further, while bond yields also rose in the wake of the ECB increased its asset purchase program at its meeting last night. Tonight’s non-farm payrolls will be interesting again, given that continuing claims are blowing out as mortgage debt defaults increase. But that’s a signal to buy stocks isn’t it?

Looking at share markets in Asia from yesterday’s session where in mainland China the Shanghai Composite took back its previous gains to finish down 0.2% to 2919 points, while the Hang Seng Index was able to stave off a similar fall to rally at the close to finish 0.2% higher at 24366 points. This keeps price below the previous sideways highs from April but still well above previous firm support at the 23300 point level:

Japanese share markets just can’t stop rising although yesterday’s session was relatively modest with the Nikkei 225 gaining only 0.3% to 22625 points, still continuing its extremely overbought uptrend. 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 – watch for an inversion to the high moving average at least:

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 down a handful of points so it looks like the market won’t be crossing over the 6000 point barrier going into the long weekend.  Momentum remains well overbought here but there’s no short positions left as FOMO takes hold, so I’d look for profit taking in the afternoon:

European markets finally cleared there throats and took a step back with the German DAX falling around 0.5% to 12430 points after its excessive prior sessions. Extremely overbought and extremely over-extended is not a good condition to enter a trend into and this clear KC signal going into tonight’s NFP should have risk takers stepping back even further:

Wall Street took only the smallest of breathers overnight in the wake of the jobless claims figures with the S&P500 finishing only 0.3% lower to 3112 points. This market is still determined to head back to its previous level at the start of the year at 3400 points with momentum remaining at well overbought levels but price action on the daily chart still indicating a strong uptrend that can’t be beat:

Onto currency markets where the dominant weak USD meme continued overnight as the Euro zoomed higher on the back of the ECB meeting, clearing the 1.13 handle and making another monthly high. Price action continues to defy gravity and I’m still watching for a potential swing below, as momentum goes into goofy extreme mood:

The USDJPY pair continued its big move higher although it had a violent swing mid session that almost confirmed the bearish rising wedge pattern before making a new session high just above the 109 level overnight. The target for this move remains 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 almost broke out overnight from its already extremely overbought condition, almost breaching the pre pandemic level (upper black horizontal line) before easing off and stabilizing once more above the 69 handle. Momentum is still signalling a potential rollover, with price action developing a bearish double top on the four hourly chart, but this requires a proper break below trailing ATR support at the 68.30 level:

Oil prices were flat again, but maintained their three month high with Brent futures remaining just below the $39USD per barrel level. This blowout up to the $40 level was never a surprising move, but I’m watching momentum readings here to see if can be sustained by pure speculation, because oil loves to violently move either way on a whim:

And, finally to gold which found a temporary amount of buying support overnight to cross back above the $1700USD per ounce level. Key support at the $1690 level continues to hold here showing that bears are nowhere near dominating, but the shiny metal needs to make a new high soon to get the animal spirits rising:

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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