Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Risk sentiment continues to fade with another hopeful session on Wall Street dashed on Friday, selling off into the close as the risk of the “second-wave” (aka giving up on the first wave) surging throughout the US, let alone other emerging countries weighed once more. Gold shot higher on Fed comments about the US economy session while European leaders came to no agreement on a longer term recovery plan to support the beleaguered, but nearly cured continent. It’s going to be a slow start to the week here in Asia with futures indicating drops on the open on shares at least, with a speech by the RBA Governor this morning to be closely watched.

Looking at share markets in Asia from Friday where the Shanghai Composite closed 1% higher to finish just shy of 3000 points in a solid week while the Hang Seng Index finished 0.7% higher to 24643 points. The daily chart shows price stuck within the moving average bands and resistance still unable to be cleared at the 24700 point level even though momentum remains positive:

Japanese share markets were mixed with the TOPIX putting in a scratch session while the Nikkei 225 lifted 0.5% to 22478 points taking back the previous losses. Daily ATR support at the 21500 point level remains firm but the lack of a proper daily high and flat lining albeit positive momentum and low intrasession volatility is pointing to a probable breakdown soon:

The ASX200 was up almost 1% throughout the session, breaking through the 6000 point barrier but fell at the close to put in a scratch session, gaining only 0.1% to 5942 points. SPI futures are down nearly 80 points or 1.3% going into this morning’s open, so like all the other correlated stock markets, take heed of daily ATR support just below the recent daily lows as the uncle point for a rollover:

European markets had a modest lift across the board to finish the week without any significant gains with the German DAX up only 0.4% to 12330 points, but slipped again alongside Wall Street in futures. Solid support at the recent lows is still holding here but there’s definite overhead resistance at the recent daily highs, just like all other equity markets:

Wall Street had another staid session, with the NASDAQ the only one to advance again – barely – while the S&P500 sold off at the close to finish down 0.6% in a very telling daily candle, finishing the week almost where it started at 3097 points. Note the series of lower daily highs with a lot of overhead selling, which although not definitive signs of a rollover is building to something:

Onto currency markets where the volatility kept opportunity going, truly lay, as Pound Sterling fell to a three week low and kept dragging the Euro down with it. The union currency fell below the 1.12 handle this time, exceeding its own two week low and remaining nicely oversold. I’m watching for a potential swing back here but momentum is not yet oversold enough to warrant a reversal, save for any outside catalysts:

The USDJPY pair remained depressed and continued its caterpillar like move sideways well below short term resistance at the 107.60 level, finishing the week below its Monday morning starting price.  The inversion trade may start again soon if no new session highs are made shortly, as the anticipated rollover of momentum builds up steam, with the 106.50 former lows the target here:

The Australian dollar had a relatively volatile breakout above the 69 handle before retreating again to finish the week almost where it started at the 68.30 level. Both short and medium term bears are still in control here, so watch for continued price action to hug the low moving average with a possible return to last week’s lows at 68 cents:

Oil prices lifted slightly to just match the previous weekly high with the Brent futures just below the $42USD per barrel level. Price is ready to go back to overbought readings on the daily momentum chart so we could see a retest of the previous breakout highs above $42 shortly, but the pattern maker in me is seeing the development of a possible double bearish top here:

And, finally to gold which had the biggest gains across the undollars with a potential breakout that could finally follow through as the patient long positions have held on for quite awhile here. As l I said on Friday’s Macro Morning – low volatility always begets high volatility and that’s what we saw with a breakout to a new weekly high above the $1742USD per ounce level. This matches the previous nominal  highs and sets up for further upside, but watch for the usual weekend shenanigans to foil this move:

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!