Macro Morning

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Australian dollar hits new highs as king dollar swoons

By Chris Becker 

The NASDAQ was the only stock market that lifted overnight and that was due to nefarious share splits as speculators rushed in, pushing the edifice higher while everyone else looked around and nervously swallowed. China’s potential blocking of the TikTok sale in the US was behind some of the apprehension, with the USD falling again as the Australian dollar made a two year high. Bond yields continue to range trade although the 10 year Treasury fell back to a new weekly low while commodities broadly gained with copper now at a two year high.

Looking at share markets in Asia from yesterday where in mainland China the Shanghai Composite closed back below the 3400 point level, down 0.2% to 3395 points while in Hong Kong the Hang Seng Index tried but failed to catch back the previous session losses, falling sharply at the close to finish 1% lower at 25177 points.  Price was ready to push higher again through resistance around the 25400 point level but yesterday’s bearish engulfing candle maybe the final warning that all is not good here in the occupied territory. I’m continuing to watch for a potential break below the low moving average here, but its likely this will follow Chinese stocks:

Japanese stock markets are also moving higher, the Nikkei 225 up 1.1% at 23139 points taking back half of Friday’s losses. Futures however are indicating a pullback of that result with staunch resistance at or around the 23400 point level still rejecting any further advances on the daily chart – again, watch the low moving average and Yen for an indication if this pressure can be ameloriated:

The ASX200 is the odd one out, closing 0.2% lower at 6060 points as the Australian dollar remained near its 2020 highs, putting a dampener on local results. SPI futures are down over 1% in response to the wobbliness overnight, so it looks like the bourse will still well under the 6000 point barrier and could retrace into a minor dip back down to trailing ATR daily support nearer the 5800 point level. The daily chart still reveals a market unable to make substantial headway with significant resistance above, mostly due to the lack of confidence in banking stocks (which make up half the index):

European markets stumbled yet again, with broader losses this time across the continent as a much higher Euro and Pound Sterling weigh on stocks. The German DAX fell back 0.7%, closin below the 13000 point level at 12945 points, but not yet breaching short term support or weekly support. The daily chart had been looking to clear the triple top bearish pattern but this rollover may have legs – watch for any further retracement below the low moving average:

Wall Street had a very interesting session with only the NASDAQ pushing to a new record high due to a stock split, because, WTF not…Meanwhile the S&P500 was unable to make any advances, falling back to just on 3500 point, losing only 0.2% or so. The four hourly chart shows this minor blip as part of a market that remains well overbought and ready to pop even higher, although momentum is rolling over for a potential short term dip for the BTFD crowd to step back in again:

Currency markets were broadly in line with a weaker USD across the board with Pound Sterling continuing its surge while Euro advanced and broke through the 1.19 handle properly, finally making good on previous breakout. Four hourly momentum remains somewhat overbought as it becomes ready to engage the previous weekly high at the 1.1950 level:

The USDJPY pair bounced back on the weekend gap open following the Abe resignation on Friday that saw it lose over 100 pips swiftly. It managed to get back towards the 106 handle but didn’t stick, with short term buying support waning. Watch for any breakout above the high moving average on the four hourly chart to have legs here:

The Australian dollar reached a new two year high overnight, just breaking through the 74 handle before retracing slightly to beat its high on Friday. As I asked yesterday, just how far can this go – parity is off the table, but the weak USD meme will take it a bit further from here, with my terminal target still intact at 80 cents:

Oil futures fell back again as volatility begins to build again with Brent continued to be pushed back below the $46USD per barrel level, falling 0.5% to the $45.50 level. The previous breakout doesn’t look like extending higher as price gravitates back to the long held neutral positions at or around the $45USD per barrel level as four hourly momentum goes negative again, watch for a potential selloff below the $45 level:

Gold continues to slowly firm here, with a modest new start to the trading week, gapping slightly higher on the open but not moving any further overnight mainly due to thin trade due to the closed London markets, finishing at just below the $1970USD per ounce level. Price continues to be supported at the several week long $1930USD per ounce level, but needs a bit more momentum here before calling a new uptrend in comparison with other undollar assets:

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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