Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Risk sentiment continues to grow negative – outside of tech stocks – with Wall Street falling in response to the US Supreme Court ruling on the fraud-in-chief’s tax returns and the rising death toll and positive caseload from coronavirus. The USD firmed overnight as did bond yields, while only oil fell in the commodity space as other industrials like copper and iron ore continues to lift, and gold remains above the $1800USD per ounce level.

Looking at share markets in Asia from yesterday where the Shanghai Composite remained above the 3400 point level, closing 1.4% higher to 3450 points while in occupied Hong Kong the Hang Seng Index held on to some minor gains, up only 0.3% to 26210 points. The daily chart still 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 had a mixed session with the TOPIX going nowhere while the Nikkei 225 lifted off the floor to finish up 0.4% to 22529 points. Futures are indicating a small move lower following the positive Wall Street lead with the daily chart showing the inability to return to the previous anemic session high, as this sideways trend gets tiresome. I’m watching (and hoping) for a break below that low moving average and daily ATR support:

The ASX200 finally put some runs on the board, lifting nearly 0.6% higher to 5955 points but still remaining under that elusive 6000 point barrier. SPI futures are likely to take back most of that gain, currently down 25 points or nearly 0.4%, so I don’t expect we’ll see a retest of the highs here as momentum rolls over to end the week on a sour note:

European markets pulled back again with some decent falls across the continent and on the FTSE, which fell nearly 2% while the German DAX stood out by putting in a scratch session, closing 0.1% lower to 12489 points. Another market that has effectively done nothing all week, hoping to stabilise here around the 12500 point level as it continues to fail to retest the May highs at just below the 13000 point level:

Wall Street was completely mixed with the NASDAQ soaring to new heights again while both the Dow (off by over 1.4%) and S&P500 stumbled, the latter falling nearly 0.6% to finish at 3152 points, almost threatening 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 there’s still no reason to be short US stocks yet unless support is solidly closed under:

Onto currency markets where the USD came back to strength again with all the majors retreating. Euro flopped once more on the initial jobless claims print, falling back nearly a full handle after recently making a new intraweek high just above the 1.13 level. This takes price back to the start of week entry, with ATR trailing support at the mid 1.12 level still firm, but this change of direction as momentum inverts could see this come under threat later tonight:

The USDJPY pair continues to fall despite USD strength, still pushing below former trailing ATR support as momentum remains oversold and Yen buyers keep stepping in be just above the 107 handle. Again, today’s action will be illustrative if equity markets don’t stabilise, so watch for a follow through here below the 107.20 level:

The Australian dollar again followed Euro overnight with a reversion back below its own low moving average on the four hourly chart to the mid 69 level as USD gained strength. The inability to get above the 70 handle remains an interesting price pattern to watch on the four hourly chart, and as I said previously, I’d wait for a proper break above 70 cents before getting excited:

Oil prices turned over last night with both WTI and Brent futures falling more than 2%, the latter closing just above the $42USD per barrel level, unable to get back above the previous price highs from this rebound rally. Daily momentum is still positive but obviously rolling over, with price needing to be support at the recent lows above $40:

Gold was unable to put in another new daily high, with only a mild retreat to remain above the $1800USD per ounce level.  Momentum is moving towards a more extreme overbought mood here, with price now well above its trendline so a minor pullback on profit taking is to be welcomed to make it more sustainable. 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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Comments

  1. Feels like a big red dildo com.ing for the AUD on the candlestick chart.

    Touched .70 for a millisecond but couldn’t breach again.

    Looming shutdowns in Aussieland starting to become known in global news reports and “spikes” in Coronavirus. Such a beautiful word the msm has adopted.

  2. Interesting night, the S&P selloff at open was quite ugly. The NASDAQ just seems to be unstoppable at the moment!!

  3. BigDuke6MEMBER

    Gold will have a nice run up to the election in the USA. Tension about trump not accepting the results may see it hit new highs. I’m going all in. In the short term crypto seems tempting as HKers seek transferable wealth.

      • BigDuke6MEMBER

        I’ve got NCM , SLR and KCN for at least 10 years now.
        KCN was good but a coup in Thailand years ago took it from $10 to 20c. It’s now 40c.
        I’m a gold bug but not unconditionally. I’m out the day after the USA election