Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

It was a bath of blood on European stock markets overnight with Wall Street, precious metals and commodities then tumbling in response, then a late fill by the BTFD crowd saw some of this clawed back, but confidence is shattered nonetheless. Rising cases of COVID-19 in Europe and continued election and legislative chaos in the US were targeted as the reasons behind the falls. It should translate into some selling here in Asia as Japanese markets return from their holiday.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite sold off into the close, down nearly 0.7% to 3316 points while in Hong Kong the Hang Seng Index fell even faster, down 2% to 23950 points. The August lows at 24000 points have been broken here with a substantial breakdown, watch for the 23000 level to come under pressure next as buyers desert:

Japanese stock markets were closed for a holiday (“Respect for the Aged” – something a lot of pro-COVID “kill the oldies” brigade could learn) and are set to come back with a flourish on the open today. The daily futures chart of the Nikkei 225 shows a potential drop below the 23000 point level, although Yen sold off overnight and it appears that a test of the early September lows, not the July lows is more probable here:

The ASX200 sold off as well, having started the session flat but sold off after lunch to finish 0.7% lower to 5822 points, down nearly 5% for the month. SPI futures are down nearly 80 points or more than 1% again, but will this translate into substantial falls come the open this morning as we head to multi-month lows:

European markets sold substantially across the board, with the German DAX swamped by a 4.4% loss to 12542 points, making a new monthly low in the process after looking so firm on the daily chart. Support at the 12900 point level has been wiped out and the trend channel looks to be broken, although ATR daily support at the 12400 level is not yet breached – its dour days ahead:

Wall Street was looking to follow the same trajectory with the S&P500 down over 2% lower at one stage before a late rally saw that gap close by half, finishing only 1.1% lower to 3281 points. The four hourly chart was showing how support at the key psychological 3300 point level was holding on but now has been decisively broken. The key point to watch tonight is a return back above that level to see if this was just a one off:

The four hourly NASDAQ chart maybe giving the clearest signal that this indeed could be a once off – its already back to the previous support level – but still below the previous weekly lows at the 11000 point level:

Currency markets saw a big return of a strong USD with the Euro pushed to a new weekly low and almost breaking the 1.17 handle as well. This at least gives a better picture of the short term direction as the union currency lurches lower, dragging Pound Sterling with it:

Yen buying stopped as well, with the USDJPY pair breaking out of its recent funk with a surge above the mid 104 level and the high moving average on the four hourly chart. This is only a temporary reprieve as there’s still a lot more to unwind as the August lows (solid black horizontal line) provide substantial resistance:

The Australian dollar was in a similar predicament to Euro, being relatively calm before the storm and sold off sharply, moving over 100 pips lower on the risk off event, almost breaking the 72 handle along the way. A very weak bounce saw it finish this morning at the 72.20 level, back at the previous weekly lows where it could fall over again:

Oil futures couldn’t hold on either, with both Brent and WTI markers falling back to their pre-breakout levels, the latter falling below the $42USD level. As I noted yesterday, the daily chart hasn’t shown a break above trailing ATR resistance yet so this has the potential to fizzle out here as daily momentum rolls over:

Gold and silver followed the Australian dollar as all the undollars broke, although after briefly breaking below $1900, gold was able to head back to its previous weekly lows at the $1913USD per ounce level.  The daily chart had been showing a descending triangle pattern forming and here we are again at the bottom of that pattern – watch for trailing ATR resistance at the $1925 level for a possible re-surgence:

 

 

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. “The Australian dollar was relatively calm despite the intrasession volatility to finish the week out just below the 73 handle again, ……….”

    Might not have updated for some reason Chris