Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

Global stock markets saw a mixed end to the trading week with Wall Street trying in vain to burst out of its recent funk with a series of solid corporate earnings, although Friday night saw a rise in bond yields and fall in the USD, as expectations of more upside in equities continues to mount. It should be a steady start to the week here in Asia as risk markets continue to ignore the growing pandemic and still discount a miraculous recovery before Christmas.

Looking at share markets in Asia from Friday where the selling abated finally in China, the Shanghai Composite closing 0.1% higher to 3214 points while in Hong Kong the Hang Seng Index finished 0.5% higher to 25089 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 not yet negative, but considering a full rollover to follow:

Japanese stocks were the odd one out, with both markets slipping to finish the week on a sour note. The Nikkei 225 fell 0.3% to close at 22696 points, unable to make headway after a brief breakout midweek. Futures are relatively stable here despite the small rise on Wall Street, so the move towards the 23000 point level continues to be thwarted so watch price gravitate below the high moving average for now:

The ASX200 had a strange session to finish the week, gapping higher at the open again before being down all day until the last 15 minutes where it then put on 0.4% to remain above 6000 points at 6033. SPI futures are dead flat so it will interesting to see if the market can maintain the 6000 point level after the weekend gap, although daily momentum is quite positive:

European markets took in some disappointing economic prints but in the main, finished slightly higher with the German DAX up 0.4% to 12919 points, almost matching its previous high. The daily chart continues to show a steady uptrend from the early June lows and a further retest of the subsequent high is to be expected this week as momentum goes overbought:

Wall Street had fairly tight sessions to finish the week, although the headline Dow retreated slightly, the broader S&P500 closed nearly 0.3% higher to 3224 points with the daily chart clearly showing how price is matching the previous highs. Support remains strong at the 3100 point level, so failing a surprise on earnings, this should leap higher and exceed the previous high:

But I’m still watching the funky NASDAQ as the harbinger of doom. The daily chart showed a break of the bearish rising wedge pattern but this hasn’t been confirmed yet by a break below key support at the 10400 point level:

Currency markets had relatively little volatility around the secondary US and Euro economic prints with Euro unable to beat its mid week highs at the mid 1.14 handle again, but not yet created a topping action pattern. Price is slowly coming back to the 1.14 handle as momentum rolls over, so watch for a break of the low moving average as the band moves downwards:

The USDJPY pair was unable to bounceback again, moving sharply back down to the 107 handle after stalling at the former trailing ATR support at the 107.20 level. Momentum has switched back to a negative setting, as this pair remains in swing mode:

The Australian dollar followed stocks again with a swing back up through the 70 handle but unable to engage any further to finish the week just below that level. I’m still watching for a break below the previous strong resistance level after the mid week false breakout for possible retest of the lower edge of the wide rectangle pattern at the 69.30 level:

Oil prices finished the week a little weaker on both markers with Brent futures slipping slightly to just above the $43USD per barrel level, still unable to make good on the previous series of new daily highs. While daily momentum is slowly picking up again, as price finds support but I still contend it requires a burst through the $44 mark to get going:

Gold was starting to concern the longs and gold bugs alike with a stalled price pattern that briefly turned into a mild retracement below the $1800USD per ounce level before the Friday session bought it back on track to match the previous highs. I’m continuing to watch the low moving average level just below the $1800USD level and for momentum to rollover if hesitation mounts again:


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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