Macro Morning

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Australian dollar drops as RBA talks it down

By Chris Becker 

After a quick pull, the Fed gave markets a solid shove higher overnight in its latest FOMC meeting, keeping its tune in the narrative ballpark to “do whatever it takes” to support the US economy. The USD fell even more to record lows against the majors while Wall Street rallied alongside commodities, as gold tried to get back to its previous near $2000USD per ounce high. This will be a solid catalyst for Asian stocks today, although higher currencies could weigh on sentiment.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite surged on bargain buying, up more than 2% to close at 3295 points, while in Hong Kong,  the Hang Seng Index has rebounded nearly 0.4% to 24885 points. This keeps price just above trailing daily ATR support but momentum remains slack at best as this near month long downtrend decelerates back below the point of control at 25000 points:

Japanese stocks have slipped further this time, with the Nikkei 225 closing 1.1% lower to 22397 points. Futures are up this morning in line with other risk assets, with price looking to bounce off mild support at the 22300 point level but still looking weak in the medium term as this market broadly tracks sideways as Yen buying continues:

The ASX200 clung on to just above the 6000 point level, finishing 0.2% lower to 6006 points, as the latest CPI print puts in a record decline.  SPI futures are up over 50 points or more than 0.5% on the dovish Fed news, so that barrier should be supported strongly today, pushing price back up towards the previous session highs as momentum holds onto positive readings:

European markets continue to feel the weight of their domestic currencies, with most bourses putting in mild sessions, with the German DAX closing 0.1% lower to 12822 points. Momentum continues to roll over from its overbought status but price is not yet following, holding on to short term support here, but the conditions are still setting up for a swing play down to 12000 points:

Wall Street was all over the FOMC meeting and jumped at the slim words of “support” and “whatever it takes” again with the S&P500 lifting more than 1.2% to finish at 3258 points. The four hourly chart shows how price continues to bounce off the 3200 point support level and now getting momentum going above the 3250 point resistance area, setting up for a retest of the previous highs here tonight:

Currency markets remain heavily concentrated against USD and after a short reprieve, Euro moved to a new yearly high overnight, briefly pushing through the 1.18 handle and continuing its strong runup from last week. Momentum is picking up again as everyone piles in to a no-lose situation in selling USD:

The USDJPY pair was again pushed lower with a break below the 105 level although the price decline is obviously decelerating. 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 firmer support here just below the 105 handle but look for signs of a break below the recent session lows for more downside:

The Australian dollar continued its comeback and this time broke through it previous weekly highs above the 71.70 level, almost breaking the 72 handle in the process. Momentum has switched from positive to nicely overbought as the FOMC meeting came and went as a strong signal for more Aussie upside – or is there?

Oil futures came back slightly with the Brent marker finally able to breach the $44USD per barrel level, lifting over 1% alongside the WTI crude market. Daily momentum remains in a nice positive mood but this market remains in a bullish sideways pattern at best, and remains tiresome to trade! Keep prepared for a violent breakout either way soon:

Gold tried to get back to its previous record high and matched it intrasession before closing at the $1970USD per ounce level in a very strong session overnight. The four hourly chart shows this short term consolidation and then retest quite clearly and once the $2000 level is breached, the rest of the world may pile in. Just keep watching silver however:

 

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. desmodromicMEMBER

    Who or what is manipulating silver? Twice in the last two days the price has risen then plunged lower, before settling at its previous level.

  2. Chris, I’m trying to figure out if you mean ‘watch silver’ as the one to really benefit from going long with, or to watch because it could break down, indicating the truer nature of a precious metals rally…?

    I’m thinking the former, but am not sure 😛

    • migtronixMEMBER

      I like silver watches. Stupid pandemic, I haven’t bothered to wear one in months.

      What day is it? Today.
      What time is it? Now.

    • I’m reading the line as “it could go up or it could go down.”. I’ve got a large position in silver.

    • Yes. I shouldve added a second chart, but had to go do the school run!
      Silver is exhibiting a lot of intrasession volatility but is also gravitating to a point of control around the $24USD per ounce level. I suspect a lot of, shall we call it – positioning – going on here….(all markets are manipulated) that if it resolves in a violent breakout will pull gold with it.

  3. Is there anybody out there who still thinks the current market represents a bounce before falling again? Equity markets seem disconnected from the real economy, but it is what it is.

    In other words, is the massive worldwide govt stimulus actually going to keep the markets bizarrely inflated (aka The End of Capitalism as Damien puts it) long term, or will it all eventually run out of steam?

    • peterbruceMEMBER

      These past few months and the current period just feel a lot like “The phony war” to me. The war/cliff is out there, and we are approaching, but it’s party time and no-one seems to know or care.