Macro Morning

See the latest Australian dollar analysis here:

By Chris Becker

Another US unemployment print in the midst of the COVID-19 pandemic passes by with big swings again, with the internal picture still looking woeful, yet Wall Street loved it and pushed to new highs, although tech stocks wobbled. Speaking of wobbliness, precious metals started to tumble in the Asian afternoon session after putting in their own record highs, with silver pushed down from $30 to $27USD per ounce before a mild recovery late on Friday, with gold finally making a new daily low but still well above the $2000USD per ounce level. Other undollars had mild selloffs as well, capping off a week of relatively strong moves against King Dollar. Futures are looking good for Asian share markets on the open this morning, with weaker domestic currencies helping the mood.

Looking at share markets in Asia from Friday where in mainland China, the Shanghai Composite lost further ground to finish 1% lower at 3354 points, while in Hong Kong the Hang Seng Index finally showed its hand by reversing solidly below recent support, falling 1.6% to 24531 points. This drags price back below previous trailing daily ATR support as daily momentum solidified itself in the negative zone, with a follow through likely as more sanctions against HK from the US weigh on sentiment:

Japanese stocks also finished lower for the week, with the Nikkei 225 falling 0.4% to 22329 points as Yen buying saw the correlated USDJPY pair fall. Futures are a little more uplifting this morning but price has been unable to find any sort of direction here at the point of control around the 22400 point level as this market still looks a little weak. I’m watching for a potential, but low probability breakout above the 22600 level:

The ASX200 played catch up with the bears, selling off to finish the week exactly on the 6000 point level. The daily price pattern is very flat indeed, unable to get a proper new daily or weekly high in some time, although SPI futures are up nearly 50 points as traders try to copy the delusion on Wall Street as vaccine news over the weekend provide some hope. This oscillation around the key point of psychological control at the 6000 level will continue here this week with a new breakout above the 6080 point level required for any definitive upside action:

European markets had modest sessions to finish the week, helped along by lower domestic currencies in the wake of the NFP with the German DAX finishing up 0.6% to 12674 points, capping off a week of no direction after its previous solid one day bullish reversal. I said last week that reversal had nowhere near translated into anything meaningful despite a big kick from Wall Street – its seems the delusion can’t get across the Atlantic just yet as continental markets remain in the balance here with daily and weekly momentum rolling over:

Wall Street absorbed the NFP print with aplomb, with pundits latching on to the “new” job creation without worrying about the permanent losses, sending the S&P500 up a handful of points, with further advances in futures indicating more upside on the open this evening. The daily chart still shows price not having any hesitation and surging higher, remaining nicely overbought with price action all above the high moving average and making new daily highs – its still ready for the next stage of irrational exuberance:

Currency markets finally flipped against USD with the undollars taking a small dive throughout the Friday session, but overall remaining strong. Euro fell back below the 1.18 handle after rebuffing its former high nearer the 1.19 level with momentum having previously getting a little overbought. The next level below on the four hourly chart to watch this week is support at the 1.17 zone as momentum now negative for a short term swing only as the weekly trend remains up:

The USDJPY pair continues to struggle even with the swing in USD strength although Yen buying abated somewhat on Friday night with a nice breakout after a slowdown into the 105.50 area mid week. Having moved up to almost the 106 handle, price has retraced slightly and we might see a gap down back to the point of control at the mid 105 again:

The Australian dollar had the biggest falls against USD, after recently surpassing its previous weekly high above the 72 handle it was pushed solidly below the 72 handle in the wake of the NFP print, getting to the mid 71s but not any further. Support at or around the 71.70 level continues to be respected and should still provide an uncle point this week, but watch momentum to possible overshoot into the negative zone for a follow through:

Oil futures were flat with the Brent marker slipping back below the $45USD per barrel level as the previous breakout turned into a fizzer despite a clearance of daily and weekly highs. The daily chart is still showing a sideways bullish trend but the failed WTI breakout previously is playing alongside here as well:

Gold finally had a selloff, ranging over $40 on Friday night as profit taking took hold in what had to eventually happen as the trend got parabolic, finishing at the $2034USD per ounce level. I did say last week that after breaching $2000 that the FOMO trade will see everyone pile in, but its been too far too fast, as show in silver as well with a near 10% reversal. The key here for a sustainable uptrend is further retracement, even as low as $2000 to let the price breathe a bit and the next stage to eventuate – but don’t be surprised if it all of a sudden rockets higher 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!