Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Volatility of the bad kind is creeping in to risk markets with the NASDAQ setting a record high overnight before violently closing 2% lower that took correlated stock markets down with it. Oil prices fell back too as the USD oscillated against the majors, lifting vs Yen and Pound Sterling, but Euro surged higher. It’s going to be a busy day here in Asia as traders re-evaluate their positions in this topping action.

Looking at share markets in Asia from yesterday where the Shanghai Composite was up nearly 2% to 3448 points while in occupied Hong Kong the Hang Seng Index was also up nearly 1% before slowing down at the close to finish with a scratch session at 25772 points. The daily chart shows price continuing to stabilize here after almost retracing all of last week’s breakout with momentum readings remaining nicely overbought. Support is still hard to discern here as price action centers around the high moving average:

Japanese stocks were the best in the region, with the Nikkei 225 up over 2% to close at 22784 points. Futures however are pullback of most of that move today given the whipsaw on Wall Street overnight. The daily chart remains blocked in on tight levels of support and resistance at 22000 and 22500 points respectively with a sideways bullish bias – breakout trading the way to go here:

The ASX200 was up over 1% at one stage, retracing in the middle of the session before a surge at the close sees it up 0.9% to 5977 points. SPI futures are down nearly 50 points in response to the volatility on Wall Street, so we’re likely to see another break below the low moving average on the daily chart and a true test of buying support in the medium term:

European markets started strongly out of the gates, embiggened by the high performance during the Asian session, with most closing higher before the violent swing on Wall Street. The German DAX closed 1.3% to 12799 points. The daily chart continues to show a steady uptrend from the early June lows but the lack of any new session high during multiple retests of the May highs at just below the 13000 point level is starting to weigh here – watch for a potential break below the low moving average:

Wall Street was all over the place with the Dow ending up with a scratch session, the NASDAQ juiced and jacked to a new record high before closing 2% lower and the broader S&P500 left holding the ball to finish 1% lower at 3155 points. The four hourly chart is a hot mess, showing a potential sweep reversal here but has not gone near key support at the 3100 point level, let alone the psychological support at the 3000 point level. Wait and see and hold on tight:

Currency markets enjoyed the volatility as well with Pound Sterling falling while Euro pipped up to last week’s session high at the 1.1370 level before retracing only slightly. This looks like another clearing out of long positions with the inability to make a new high looking ominous, but the medium term trend remains quite intact:

The USDJPY pair bounced back on USD strength, pushing back to former trailing ATR support as momentum flipped from oversold levels, heading just above the 107 handle. This brings the pair back to its week long pivot point around the 107.20 level with momentum not yet positive and resistance not yet cleared, I’d be concerned about a sharp reversal down again here:

The Australian dollar followed stocks down late in the session after again trying to get back to the 70 handle but failing, now setting up a triple top bearish pattern on the four hourly chart. So far ATR support at the 69.20 level has held without a breakdown, despite a clear reversion of momentum here to the downside:

Oil prices fell back a little overnight with WTI and Brent futures falling 2% or so, the latter closing just above the $42USD per barrel level, unable again to make a new daily high. Daily momentum is flat lining here again, with price finding support as it reaches the lower edge of the trendline from the May lows, but still requires a burst through the $44 mark to get going -I’m concerned about the low level of volatility that always ends violently:

Gold was unable to put in another new daily high, with a mild retreat to finish just above the $1800USD per ounce level overnight.  Note the last four days of price action has ended with long wicks above a tight open/close range, indicative that there’s not much buying pressure to push it above the $1815 level. This could weigh in the short term, so watch for a solid move below the $1800 level even though this trend is now on a more sustainable path:

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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