Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Exuberance turned to fear overnight, and depending on what side of reality you listen to it was either Biden’s fault for leading in the US presidential polls (which means 2/5ths of SFA) or the growing 2nd wave that’s actually the unfinished 1st wave of the coronavirus. Weighing on European sentiment were more tariffs from the US, even though the closely watched German IFO survey rose much more than anticipated while the IMF downgraded most of the world’s economic growth forecasts, with a near 5% recession baked in for the year.

Looking at share markets in Asia from yesterday where the Shanghai Composite put on nearly 0.4%, closing at 2981 points while the Hang Seng Index retreated, down 0.5% to 24781 points, unable to gain further traction out of its previous breakout. An ominous bearish double top pattern is forming here on the daily charts, with price suggesting a return to solid support just below 24000:

 

Japanese share markets had a lackluster session with low volatility, the Nikkei 225 finishing 0.1% lower to 22534 points. Futures are indicating a further pullback to the recent daily lows around 22000 points proper as daily ATR support at the 21500 point level remains firm but could be under threat sooner rather than later:

The ASX200 oscillated in two large swings throughout the day before finally settling slightly up at 5965 points, again briefly touching the 6000 level before resistance kicked in. SPI futures are down nearly 100 points or so going into this morning’s open and ATR daily supprot at the 5750 level must hold here to keep this nascent relief rally intact:

European markets had the biggest falls across the board despite the better than expected German IFO survey with the German DAX falling 3.4% to 12093 points. Overhead resistance at the recent daily highs/high moving average is no longer threatened as the daily price band swings back to support at 12000 points instead. As I said yesterday, momentum is pointing to an inversion that might see a sharp retracement below 12000 points:

Wall Street is showing how facile and thinly stretched its market breadth is with a wide selloff overnight, the headline DOW off by nearly 3% while the broader S&P500 eventually closed 2.4% lower to 3050 points. The four hourly chart shows a break back down to last Friday’s low and an oversold response that should result in some steadying, but given the huge speculation in this market – and all others – could be the precursor to a big spill:

Onto currency markets where the USD buying returned due to the risk off mood, crushing undollar assets left and right. The Euro reversed course and fell back below the 1.13 handle and previous resistance, wiping out any chance of a return to a medium term uptrend. Momentum is not yet oversold here either and could continue to retrace to the former weekly lows if risk doesn’t return to the complex soon:

The USDJPY pair had yet another volatile 24 hours provoking lots of opportunity with a big swing move higher to the previous false breakout higher above the 107 handle. This goes against the usual safe haven buying but is a result of across the board USD buying as King Dollar returns. I’m watching for a move back towards the previous weekly highs at the 107.50 level next:

The Australian dollar also joined in with the selloff, breaking down and heading below the 69 handle after getting ahead of itself earlier in the week. As I said yesterday, the failure to get above last week’s high at the 69.60 level was telling and now we see a return to the previous weekly lows around the 68 handle:

Oil prices were flummoxed with both spot markers falling 6% or more with Brent futures falling back to just above the $40USD per barrel level, taking out the previous week’s gains. Again I said yesterday to “watch for the inevitable violent inversion” and here it is – support must hold here in the coming days or it risks falling another 10-15% to previous resistance at the $35 level:

Gold’s breakout had the expected pullback overnight, in line with other risk assets and a stronger USD, closing at the $1763USD per ounce level. This still keeps it above the previous nominal  highs and sets up for further upside, as momentum pulls back from its significantly overbought mood here with signs of re-engagement if price hovers above $1750 or so:

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. Goldstandard1MEMBER

    Cool, so the markets fell because of the virus, which is sticking around and decimating economies.
    How different since March?
    Why are they at record highs?
    It’s comical to watch the last 4 months.

    Oh and AFR said property to fall 10% yesterday despite nothing improving since March. Media and markets seem to be stating the obvious except underweight and late. Maybe it just seems like that because of the insightful commentary we get here in real time. Ok shut up and take my money MB.