Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Risk sentiment remained sour overnight until Wall Street opened, with traders (bots) jumping on optimistic comments from the Fed’s Bullard and hyper-deluded comments from VP Pence about the coronavirus outbreak in the southern US states. The USD sold off in response, despite European concerns over Brexit (remember that?) from Chancellor Merkel, which helped gold reach a new yearly high above the $1800USD per ounce level.

Looking at share markets in Asia from yesterday where the Shanghai Composite had another stellar session, soaring 1.7% higher to 3402 points. Meanwhile in occupied Hong Kong the Hang Seng Index was able to hold on in a wide session, eventually closing 0.6% higher to  26129 points. The daily chart shows solid short term support just below 25700 as this extremely overbought move stabilises somewhat in the short term, still setting up for a return to the pre-pandemic highs at nearly 30000 points:

Japanese stocks put in another poor session, with the Nikkei 225 falling 0.8% to 22438 points. Futures are indicating a small blip higher following the positive Wall Street lead with the daily chart showing a possible return to the previous anemic session high, but this sideways trend is getting tiresome!

The ASX200 was the worst in the region, reacting poorly to the continued Victorian breakout, falling sharply in the afternoon session to close 1.5% lower at 5920 points. SPI futures however are more positive, with a 50 points or nearly 1% breakout expected on the open, but the key is will this hold through the day with the daily chart still showing a series of lower daily highs that could spell the end of this nascent breakout:

European markets pulled back on hesitation and concern around the Brexit that won’t go away, with the previous reversal session followed through with a drop on the German DAX, closing 1% lower to 12494 points. However, alongside Wall Street, futures picked up half of this loss, with a view to stabilise here around the 12500 point level going into tonight’s session. Momentum had been picking up here but not sharply enough as its so far failed to retest the May highs at just below the 13000 point level:

Wall Street came back on sentiment alone, and for the NASDAQ, a rally in the three main tech stocks sent it up 1.4% while the S&P500 lifted nearly 0.8% to finish at 3169 points, bouncing off former resistance, now support at the 3130 point level. The four hourly chart since the Monday open has shown an inability to get back above the 3170 point level (upper solid black line) but we could be in for a breakout here as momentum picks up – no reason to be short US stocks yet!

Onto currency markets where the USD fell back again, with Pound Sterling continuing its strong breakout, now above the 1.26 handle while Euro also reacted for a new intraweek high just above the 1.13 handle in a strong move. As I said yesterday, the previous retracement was likely short term as ATR trailing support at the mid 1.12 level remains firm, but watch for this level to be maintained and price pressure to form at the high moving average:

The USDJPY pair has fallen due to USD weakness, pushing just below trailing ATR support as momentum inverts and Yen buyers stepped in to finish this morning jsut above the 107 handle. Today’s action will be illustrative if equity markets comeback, so watch for a follow through here below the 107.20 level:

The Australian dollar mimicked Euro overnight with a reversion back to firm ATR support at the 69.20 level then a breakout almost back up to its former high just below the 70 handle. This is an interesting price pattern on the four hourly chart, putting price back on trend from the June lows as the risk proxy comes online again. I’m waiting for a proper break above 70 cents before getting excited:

Oil prices were flat again in response to unexpected higher inventory levels, although Brent futures picked up a little to finish just above the $43USD per barrel level, still matching the previous price highs from this rebound rally. Daily momentum remains positive for now, with a breakout above the high moving average at $43 or so required before another legup:

Gold put in another new daily high, with a very solid session to continue the great start to the week, finally finishing above the $1800USD per ounce at the $1810USD per ounce level.  Momentum is moving towards a more extreme overbought mood here, with price now well above its trendline so its ripe for a minor pullback on profit taking. But don’t discount an all in response as new decade highs are made!

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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  1. – Brexit doesn’t solve anything. Does it the (very) high levels of debt in the UK ? Does it solve the ageing of the british population ?

    • “With leverage, it only makes sense to add it when you can be 100% certain of gains,” said Li, adding that his family sold property last year to buy stocks. “That usually happens when the old grannies start rushing in during the mid-to late stage of a rally. We are not there yet, but when the time comes I will be ready.”

      Last one in is a Chicken.