Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Another record high on Wall Street, pushing the risk complex to yet more stretched valuations as gold also makes another daily record high above the $2000USD per ounce level, with silver outshining with a near 5% gain to be above the $27USD per ounce level. Its all about the weakness of USD as it stumbles to new lows against almost everything, including Yuan.

Looking at share markets in Asia from yesterday where in mainland China, the Shanghai Composite had another scratch session, unable to get anywhere and closing only a handful of points higher at 3377 points, while in Hong Kong the Hang Seng Index advanced further to be up 0.6% to 25102 points. This keeps price bouncing solidly above trailing daily ATR support and the downtrend line from the July high, but momentum remains in the negative zone so the next step to watch is a follow through above the high moving average at 25200 points for a potential breakout:

Japanese stocks slipped  however, with the Nikkei 225 falling 0.3% to 22514 points as Yen buying saw the USDJPY pair fall back. Futures are flat this morning despite the rises on Wall Street with price looking to firm here once again at a point of control around the 22400 point level but this market still looks a little weak and unsure of direction:

The ASX200 eked out a very weak session, unable to make any headway as bank stocks tumbled, with the index eventually falling 0.6% to close a hair above the 6000 point level.  SPI futures however are up over 20 points so it seems another oscillation around this key point of psychological control continues, with a new breakout above the 6080 point level required for any definitive upside action:

European markets are trying to play catch up to Wall Street and had some modest success overnight, but only the FTSE dominated with a 1% plus return while continental stocks put in only mild rises. The German DAX ended up 0.5% to 12660 points, as price hangs on valiantly just above ATR support. The previous solid one day bullish reversal has staved off a trend reversal below 12000 points, but still requires a proper lift above the high moving average at the 12900 point level as momentum remains weak on the daily chart:

Wall Street continues to run on more upside tech earnings with the NASDAQ at a new record high above 11,000 points for the first time, while the S&P500 finished 0.7% higher to 3327 points. The four hourly chart shows price not having any hesitation and ready to keep trending higher, looking nicely overbought ready for the next stage of irrational exuberance:

Currency markets are finding more direction and momentum here as traders continue to anticipate Friday’s NFP print and a possible further fiscal stimulus from the US Congress with a slightly weaker USD pushing the Euro higher. The union currency almost matched its former high nearer the 1.09 level with momentum getting a little overbought later in the session pointing to another slide tonight before re-engaging longs:

The USDJPY pair continues to struggle to get past the anti-USD bias with Yen buying seeing price pushing back down to the mid 105’s again. Four hourly momentum has reverted from an overbought mode now into a flat line with a possible swing short trade building here on further USD weakness, so watch the current session lows for a breakdown:

The Australian dollar continued its comeback against USD, matching its previous weekly high above the 72 handle before getting ahead of itself and retracing back below that level early this morning. This could prove heady resistance coming into the NFP print so I’m watching for any signs of weakness nearer the low moving average on the four hourly chart here at the 71.70 level:

Oil futures rose again with the Brent marker pushing above the $45USD per barrel level in a possible breakout that has more upside potential this time given the clearance of daily and weekly highs. The daily chart was showing a sideways bullish trend with price unable to make a volatile move either way and this looks to have legs, but I do note that WTI had a failed breakout overnight that could be a precursor here:

And finally, the jewel in the collection – goooooooooooooooolld. The shiny metal made another record high, briefly touching the $2050USD per ounce level in another strong session before closing at the $2037 level this morning.  As I keep saying – where to from here? FOMO (fear of missing out) points to more upside, but don’t discount some speculative profit taking moves too:

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. let’s say NFP comes in good Friday cause Trump said so already. Let’s say bonds volatility at all time lows. Gold very overbought. USD a bit of a stall in downtrend. Obviously crazy to think that anything could disrupt the one way market rocket but I’m just sayin besides an asteroid what else could disrupt short-term trend? a little sell-off in Gold, bonds, buy USD? obviously I have no idea, nothing matters anyway.

  2. Would ya believe it, I’m long oil and gold stocks, gold and silver and inflation-linked bonds. What an extraordinary stroke of luck.

    • I’m still waiting for this little deflationary insolvency thingy, you know over indebted companies no income to service loans, tourism, restaurant etc just a few bucks short, a few jobs lost. The Feddy’s got this, chuck a tonne of money at it (loans they say), those that are allowed to borrow, can and will and they chuck it into assets for the future and all those that are less fortunate, stay that way – no Fed money. I suppose less earnings, GDP, income generating things will never matter. Simple. It’s funny, when inflation kicked in 1970’s style, due to oil, stocks got slammed. Supposedly inflation is good now – till it isn’t I suppose, till the Feddy’s have to do something. What was it, 6 months or a year something like that in late 60’s then again in 70’s. And yes you can’t compare demographics, tech etc the usual disinflation arguments. Fact is to me it just seems like a weird cocktail and if your right about oil, that might be the only thing to stuff it all up ie a conflict around oil again and yes there is a glut at the moment etc.

      • Yep, the dynamics were different back then – the world was coming off a gold standard and the general thinking was that the new floating currency regime (totally unbacked) would disintegrate in short order. The oil producers said no to un-backed US Dollars (inflation!) and that is when the petro-dollar concept was born, a mutual back-scratching arrangement which provided some under-pinning for the Dollar. It wasn’t really till Volcker ‘saved’ the Dollar from outright destruction that the world relaxed and embraced it: “See, the Fed has the power to breath life back into un-backed currencies,” they all trilled.

        And so, began the march of interest rates from 15% (10yr US Treasury) to practically zero today and the destruction of the Dollar is finally nigh. With $260 trillion of debt propping up asset prices from here to Timbuctoo there’ll be no Volcker magic act this time. Only printing remains and perhaps 4 or 5 yrs before we’re back on kind of commodity-backed money. While stock prices today may not reflect fundamentals they appear to be anticipating high (or hyper) inflation.