Macro Morning

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By Chris Becker 

Wall Street was sanguine on Friday night with scratch sessions across the board, as European markets slumped as Euro came back strongly against USD. The ASX200 will have an interesting start to the week with the lack of confidence over the weekend translating to a possible 1% slump at the open that could be exacerbated by poor corporate earnings as the season rolls on, with JB Hifi (JBH) and Bendigo/Adelaide Bank (BEN) the ones to watch today before the Big (not) Australian BHP reports tomorrow.

Looking at share markets in Asia from Friday’s session where in mainland China, the Shanghai Composite was treading water all session before bounding at the close, finishing over 1% higher to 3360 points. In Hong Kong however, the Hang Seng Index couldn’t get any traction and eventually closed 0.2% lower at 25183 points. Today’s open is likely to be on the weak side given the continued tensions with the US, and while daily momentum remains in the positive zone and price is still well above the low moving average, its no reason to get excited just yet:

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Japanese stock markets were relatively flat, unable to make good on their mid-week breakout with the Nikkei 225 closing 0.2% higher at 23289 points that keeps it matching the July highs. Futures are indicating a flat start this morning with momentum looking extremely over stretched here, so watch for the high moving average and the 23000 point support level come under pressure:

The ASX200 had a very solid finish, gaining more than 0.6% to finish at 6126 points. SPI futures however are suggesting a large pullback to start the trading week, down by nearly 1% or 60 points as resistance at the May highs is still too firm to create a knockout breakout move:

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European markets continued their mid week stumbles, with some pretty steep falls across the board mid-session before recovering somewhat later on. For instance, the German DAX was down 1.5% before closing only 0.7% lower to 12901 points before moving lower again in post close futures. The daily chart was looking firm here last week with solid momentum but there is a rounding or triple top bearish pattern forming here that still requires a clearance of the May highs and the June false high well above the 13000 point level:

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Wall Street may finally be getting exhausted at all the “winning” Stateside as the COVID-19 pandemic shows almost no signs of slowing down, with some Fed missives over the weekend putting some stoppers to futures to start well this week. On Friday night the NASDAQ slipped while the S&P500 also closed with a scratch session to 3372 points. The daily chart of S&P futures shows price almost back to the pre-pandemic highs (solid black horizontal line) with daily momentum still on track – albeit rolling over slightly – and price hanging on to the high moving average line. But this looks like butter spread too thin on toast at any angle:

Currency markets are slowly getting back to a weaker USD in general with Euro able to hold on to its previous gains and remain well above the 1.18 handle on Friday night, following the good US initial jobless claims earlier in the week. This still keeps it below the previous weekly highs at the 1.19 level and while daily and four hourly momentum remains positive, that is the key level to beat in the medium term:

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The USDJPY pair however was unable to hold above its previous breakout high as USD weakness crept in, slipping well below the 107 handle on Friday night. As I warned last week, the extreme overbought status was starting to revert and rollover, so we should see some more normalisation at the mid 106’s going into the weekend gap open this morning:

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The Australian dollar is still the weakest against USD, again rebuffing attempts to break the 71.70 level and maintaining a directionless format week to week. Momentum is still negative on the four hourly chart and we could see a reversion to the recent lows at the 71 handle proper:

Oil futures still can’t gain traction with the Brent marker slipping again below the $45USD per barrel level, with WTI futures also sanguine in their end of week performance. The daily chart of Brent shows a market unable to capitalise on its previous weekly breakout above the $44.30 level with considerable resistance overhead, but support remains nice and tight at the $44 level. I’m always wary of low volatility in oil, it always begets more volatility!

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Gold and silver are slowly taking a breather after a tumultuous week with the former settling just below continued short term resistance at the $1950 level. I’ve said previously that its possible this correction could spill over and continue down to the previous breakout and record high at the $1825 level, which would give price some better medium term longevity, but for now watch the $1900USD per ounce level which had the most support in this correction:

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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)

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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

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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!