Macro Morning

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By Chris Becker 

Last night saw a continuation of the bounce on Wall Street, while a stronger than expected ZEW Survey still failed to ignite animal spirits across Europe, although better employment stats from the UK saw the FTSE move significantly higher. USD and bond markets were relatively unchanged as the latest US industrial production print rose a little weaker than expected, but oil futures surged on the news of revisions to past data and the drawdown in domestic crude supplies.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed 0.5% higher to 3295 points while in Hong Kong the Hang Seng Index is continuing its bounceback, up 0.4% to 24732 points. The August lows at 24000 points are beginning to firm as strong daily support as daily momentum looks set to swing back from the oversold condition and back towards the 25000 point area:

Japanese stock markets were in retreat on the back of a much stronger Yen with the Nikkei 225 losing over 0.4% to 23454 points. There’s likely to be another retest of resistance and previous weekly highs as daily momentum remains positive, although the Yen remains a headwind. Watch for another new daily session close above the high moving average:

The ASX200 closed with a scratch session after being higher earlier in the session, losing a handful of points to be at 5894 points. SPI futures are up around 40 points so that evidence of strong buying support at the 5800 point level may turn into a proper swing long play above the high moving average on the daily chart, heading back towards the 6000 point level:

European markets showed a little life overnight with the FTSE outperforming, rising over 1% while continental stocks put on mild positive sessions, with the German DAX lifting about 0.2% to 13217 points and staying there despite a more upbeat Wall Street. The daily chart continues to show firm support at the 12900 point level as this uptrend channel and daily momentum remaining positive, but resistance is definitely building here at the recent daily/weekly highs nearer the 13300 point level:

Wall Street had a third positive session in a row, as the NASDAQ led the way again, up more than 1% while the S&P500 put in a solid session, gaining a little over 0.5% to 3401 points. The four hourly chart is showing a potential breakout above last week’s failed breakout position nearer the 3420 point level as momentum builds here:

Currency markets were mixed with Euro tripping over the ZEW survey as it got ahead of itself, unable again to break the 1.19 handle or last week’s intrasession high as it scurried back to the mid 1.18s instead. Momentum was somewhat overbought and has now retraced back to Monday starting position, so watch for a potential move lower to the 1.18 handle proper:

The USDJPY pair followed up its breakdown with yet another breakdown overnight as Yen buyers stepped in, pushing it almost down to the 105 handle to equal the August lows. Its now again considerably oversold but it could potentially break towards the previous weekly low at the 105.20 level:

The Australian dollar broke out to the upside on the release of the RBA minutes late yesterday and surprisingly was able to hold on to most of those gains overnight, pulling back only slightly to be just above the 73 level this morning. This still keeps it above last week’s price action so watch the low moving average at the 72.80 level to firm as support:

Oil futures flipped overnight due to the latest crude storage figures, with Brent futures up nearly 2% to get back above the $40USD level after recently making a monthly low. I noted that momentum was extremely oversold and price was very supportive at the $39 level (lower black horizontal line) but this move requires a more significant break above trailing ATR resistance before calling a new trend:

Gold continues to move in fashion with other undollar assets with a solid breakout that was able to beat last week’s high at the $1962USD per ounce level, before retracing later in the session to close at $1954. This remains a swing play from the oversold nature of the previous selloff as we get to a crunch point here on the intersection of the short term uptrend and the medium term downtrend:

Silver is still looking a better position here with the daily chart continuing to slowly tick above the $27USD per ounce level, with the bounce off weekly support still not getting much momentum. There is still significant resistance to overcome at the $28.30 level, but overall the medium term picture is looking more promising:

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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  1. I mentioned in a previous post that the ZEW survey is highest since May 2000.
    It usually marks market tops give and take a bit of lag.
    People in Germany are sure happy.
    I can confirm with relatives there that there is not a worry in the world as they travel to Spain and Portugal for holidays.

    On a separate note, how is Germany and Australia rated both AAA by S&P while the German 10y is -0.477 and Australia 10 year is 0.919?

  2. couple of days ago I made prediction how markets are going to behave this week and how they’ll finish.. US markets that is.
    First night was close enough as I predicted solid gains but was out to a point as I thought they’ll rally more than they did. Second night I called for small falls and DOW wasn’t far.
    Tonight call was and still is solid falls even though futures are still green and start to think there will be no reprieve on Thursday or Friday. Feels like this week will shake most of the Robyn Hooders.