Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Global stock markets are getting wobbly again with Wall Street stumbling despite good earnings from major banks and solid retail sales data for June. The ECB didn’t help or hinder with its latest meeting, although USD continued to firm from yesterday’s reversal with the Australian dollar and other commodities all fell overnight in line with the risk off mood. It should be a dour session here in Asia to finish the trading week.

Looking at share markets in Asia from yesterday where the selling accelerated in China, with the Shanghai Composite closing 4.5% lower to 3201 points while in Hong Kong the Hang Seng Index finished 2% lower to 24970 points. After fully retracing all of the previous breakout, the daily chart is now pointing towards a solid break below the 25000 point level with momentum readings suggesting more downside to follow:

Japanese stocks slipped after initially being higher as active coronavirus cases rocket in Tokyo, with the Nikkei 225 falling 0.7% to close at 22270 points. Futures are relatively stable here despite the falls on Wall Street, but the move towards the 23000 point level has been thwarted somewhat, so watch price gravitate below the high moving average as momentum still remains positive:

The ASX200 gapped higher at the open again and looked set for another move higher but was pushed lower by the latest jobs figure print, eventually falling 0.7% to be just above 6000 points. SPI futures are actually up a handful of points but overall the market will struggle to maintain the 6000 point level going into the weekend gap:

European markets were down at the open following the poor Asian lead and finished with minor losses across the continent. The German DAX closed 0.4% lower to 12885 points, although it caught back a little in futures thereafter despite the poor showing on Wall Street. The daily chart continues to show a steady uptrend from the early June lows and a retest of the 12900 high as expected, but so far it hasn’t succeeded, so watch for a potential pullback going into the end of the week:

Wall Street had wide ranging sessions again, with all three bourses finishing down and breaking the potential breakouts from mid-week price action. The broader S&P500 closed nearly 0.5% lower to 3215 points with the daily chart clearly showing how price is matching but unable to break through the previous highs as substantial resistance builds. Support remains strong at the 3100 point level, so failing a surprise on earnings, this should leap higher:

But as always, watch the NASDAQ as the harbinger – the four hourly chart still showing a new bearish descending triangle pattern is forming with a struggle to maintain support here:

Currency markets had little volatility around the ECB meeting and the US retail print with Euro deflating back below the 1.14 handle again, this time in what looks like a topping action. Price is was nicely overbought but momentum rolled over with action all around the low moving average as the band moves downwards:

The USDJPY pair was able to bounceback again, moving sharply up through the 107 handle but again stalling at the former trailing ATR support at the 107.20 level. Momentum has switched back to a positive setting, but its still too early to consider this a new trend, just a swing play:

The Australian dollar followed stocks again with a swing back below the 70 handle as support at that level failed. I warned yesterday that momentum was notably overcooked and ready to flop below so continue to watch the risk correlations with other assets, particularly commodities and a possible retest of the wide rectangle pattern at the 69.30 level:

Oil prices were weak again on both markers with Brent futures slipping slightly to the $43.30USD per barrel level, unable to make good on the previous newdaily high. Daily momentum is slowly picking up here again, with price finding support but I still contend it requires a burst through the $44 mark to get going:

Gold is concerning with the current stalled price pattern turning into a mild retracement below the $1800USD per ounce level overnight. I’ve been saying for awhile now that the next test of this uptrend was matching and then exceeding the $1815 level but instead there’s been hesitation here that could be temporary or a sign of a rout, so watch the low moving average level just below and momentum to rollover into swing status:

 

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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