Macro Morning

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Australian dollar drops as RBA talks it down

By Chris Becker 

The Fed seemingly pulled the punchbowl overnight, extending its lending program from the September deadline which saw bond yields fall sharply, pulling Wall Street down with it. The volatility in precious metals plus a downbeat consumer confidence print didn’t help restore risk sentiment with European stocks also on the decline. Commodities were mixed with gold still hitting an all time high just shy of the $2000USD per ounce level.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite was up more than 1% before the lunch break but managed to hold on and finish 0.7% higher to 3227 points, while in Hong Kong the Hang Seng Index did the same, rebounding nearly 0.7% to 24772 points. Futures are looking a little more bleak and the downtrend remains obvious on the daily chart as ATR support comes under pressure as momentum inverts to negative:

Japanese stocks slipped again with the Nikkei 225 closing 0.2% lower to 22657 points. Futures are indicating further falls on the open this morning in line with other risk assets, with mild support at the 22300 point level looking to hold in the short term, but still nothing to get real excited about as this market broadly tracks sideways as Yen buying continues:

The ASX200 was looking to break below the 6000 point psychological level but instead was buoyed by commodity stocks and gold miners to finish 0.3% higher to 6044 points. SPI futures are down nearly 40 points or 0.5% so that barrier should be broken convincingly today, taking price below the low moving average and possibly setting up a dip towards the 5800 point ATR level:

European markets continued to be weighed down by the higher Euro and Pound Sterling although the FTSE managed to eke out a 0.4% gain while the German DAX again closed with a scratch result, falling a handful of points to finish at 12835 points. Momentum has rolled over from its overbought status but price is starting to slip below the low moving average, setting up the conditions for a swing play down to 12000 points:

Wall Street stumbled again with the NASDAQ taking back its previous gains to fall nearly 1.4% while the S&P500 did the same, scratching back the previous lift to finish 0.6% lower at 3218 points. The four hourly chart shows how price bounced off the 3200 point support level but could not get momentum going above the 3250 point resistance area, setting up for a retest of support here tonight:

Currency markets remain heavily concentrated against USD although there was a minor reprieve against the main major Euro overnight which settled just above the 1.17 handle after an epic runup last week. I suggested yesterday that the four hourly price pattern showed a small amount of exhaustion with deceleration in the last two sessions, as momentum inverts from its previously overbought status, so watch the recent session lows for signs of a potential but unlikely reversal:

The USDJPY pair was again pushed lower as expected with a determined push towards the 105 level where it sits now going into the Asian session. This has been another big selloff that should finish soon but currencies can remain oversold for a long time if necessary to get to their new “support” levels. Price has decelerated into a modicum of support just above the 105 handle but look for signs below the recent session lows:

The Australian dollar continued its comeback but slowed down as it reached it previous weekly highs near the 71.70 level. Momentum remains positive but is slowly rolling over here with today’s CPI print the key risk to its ability to remain so lofty against USD:

Oil futures fell slightly despite the lower USD with the Brent marker still unable to breach the $44USD per barrel level, falling 0.6% to the mid $43 level alongside the WTI crude market. Daily momentum had been pushed into the overbought mode and support has been very firm, but this remains tiresome, so be prepared for a violent breakout either way soon:

Gold made another record high almost breaching the $2000USD per ounce level before a very violent snapback alongside silver, losing nearly $100 in only a short few hours before regaining most of that in the NYLON session overnight. The four hourly chart shows this overextending trend quite clearly but also the re-entry point at the former high after a bit of calming action first. Once $2000 is breached, I think it’s game over:

 

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. bskerr2MEMBER

    I was buying silver yesterday from ABC Bullion and their website was so over loaded that it was timing out and failing. I called support and yep, they confirmed it was overloaded which basically means to many connections to service (poor website scaling) I wonder what hit banks capital ratios are taking as more deposits go from savings into gold silver and crypto.

    • migtronixMEMBER

      Very little. Who ever they bought the physical or virtual from will just deposit in theirs….

    • Ronin8317MEMBER

      A transfer of money from a buyer’s account into ABC Bullion’s bank account doesn’t take money out of the banking system. For what you’re describing, people have to take phyiscal notes out from the bank and then hiding it under the mattress.

      For ABC Bullion, it is better for them to say ‘website has crash’ rather than ‘we have no silver to sell’.

      • They still sell, you just dont get delivery into the vault for a while.
        My last purchase took about 8 week to get delivered

    • Robert Johnson

      Don’t underestimate cashed-up boomers who will cash out and quietly buy physical gold in order to bring their assets and income below pension thresholds.

      • DominicMEMBER

        That would be a very sensible thing to do. Buying bullion has the advantage of making one’s true asset position very opaque.

    • ErmingtonPlumbingMEMBER

      Whats scrap copper and brass doing?
      Ive got a couple of 100 Kgs and don’t know whether to hold or sell!
      It is taking up a bit of space in me garage?

    • migtronixMEMBER

      It will be for BullionBarron! He’ll be collecting from TheKouk 8 years later…

    • DominicMEMBER

      On ABC radio yesterday evening: the ‘chief strategist’ at Investsmart – his 3 to 4 yr view is that gold will be trading much lower than it is today. Good to see ignorance is alive and well among investment professionals. I reckon 10% or less of the aforementioned actually have a clue what they’re talking about.

        • DominicMEMBER

          Funny you should mention it, Ermo, I have a couple in the oven as we speak. I just need to actually finish one of them (for once). And edit it. And publish it. And come up with a suitable pseudonym in case it bombs!

  2. Robert Johnson

    Report from working-class high school in Melbourne, Years 7-10, only about half of students are actually participating in the remote learning program, logging into daily class meetings with teachers etc. The overall curriculum has been *substantially* watered down and the focus on ‘coping’ instead of learning.

    Basically this year is going to be a wash and we will need to repeat the year. Victorian kids are going to be a year behind the rest of the country and for some kids with learning difficulties or troubled backgrounds they will simply never recover.

    We should be forecasting the long-term impact of this and baking it into the cost of lockdown.

    Meanwhile there is not a single instance anywhere on the planet of a student infecting a teacher, and the risk of a kid dying from COVID is about the same as getting struck by lighting.

  3. Chris, I assume by “game over” you mean that the gold goes to the moon?

    I concede that it would likely imply fiats are truly in their death throes; though, it would be interesting to see what would happen in another truly risk-off event, and how gold vs the USD would respond.

    • Yesterday I asked Dominic about what he thought of the USD as a weapon against Chyna. If the Fed turn off the swap line spigots surely demand for existing USD will increase. USD debt is not going to disappear just like that its will take years to work out/through

  4. Banana ManMEMBER

    Well those two girls in qld are not going to be getting young Queenslander of the year awards. Snuck back from dirty vico through syd and home delivered it. Lockdown 2.0 here we are. Shame the government s of the world didn’t care more about tobacco I think I would have supported a community lockdown whilst everyone quit.