Macro Morning

See the latest Australian dollar analysis here:

Australian dollar torn between election heaven and virus hell

Risk is back with the double whammy catalysts of a much better than expected services PMI in the US, coupled with higher hopes of a US stimulus package (although it remains to be seen if anyone isn’t in quarantine due to the TrumpVirus) which saw Wall Street surge nearly 2% and the USD hit by almost everything undollar asset. Oil bounced back as well with a 6% rise in Brent futures while gold saw a small reprieve and silver lifted more than 2%. All eyes on the Australian dollar today as it remained in a holding pattern overnight, with the RBA meeting looming large on the economic calendar.

Looking at share markets in Asia from yesterday’s session where Chinese mainland markets remain closed for holiday’s but in Hong Kong, the Hang Seng returned to close more than 1% higher at 23767 points. It was up almost 2% during the session and the daily chart is showing a nice breakout but hesitation around the former 24000 point support level that needs a decisive break to call this swing rally:

Japanese stock markets also had a good session with the Nikkei 225 taking back all of Friday’s losses to close 1.2% higher at 23312 points. Strong resistance at 23300 points is the key level to beat here today or this week, so continue to watch the low moving average to act as short term support:

The ASX200 was the biggest mover, helped along by the reversal in risk plus the Federal Budget news with a big surge, closing 2.5% higher at 5941 points.  SPI futures are up nearly 30 points so we could see a return above the 6000 point resistance level which has been quite firm. Note how daily momentum is not yet positive however:

European markets were united across the continent with a solid start to the week, with the FTSE advancing 0.7% and the German DAX the strongest to finish 1.1% higher, closing at 12828 points. The daily chart is showing a potential breakout building here above the high moving average or at that 12900 level as price action bunches up above daily ATR support at 12400 points. Daily momentum is still negative here but triggering a reversion for a swing play:

Wall Street loved the ISM print and the news that Trump is going back to the White House (to infect the rest of the workers there I guess?) with tech stocks leading the way as the NASDAQ rallied 2.3% while the S&P500 finished 1.8% higher at 3408 points. The four hourly chart shows a clear breakout above last week’s price action with acceleration to continue well above the 3400 point level – so damn the COVID torpedoes and get buying!

Volatility in currency markets was matched with USD selling off against most of the majors, as Euro broke out above last week’s price high and continued up towards the 1.18 handle. Now slightly overbought, there is a case to be made for a small reversion back to the mid 1.17’s:

The USDJPY pair came back from the weekend gap in a solid fashion and then pushed higher, but was unable to match the previous week highs, finishing above the 105.70 level where it sits this morning. As a risk proxy, its doing its thing, with trailing ATR support at the 105 handle remaining firm here and momentum slightly overbought. Watch for a proper test of the previous weekly highs and a breakout above the 106 level:

The Australian dollar was the odd one out, only nudging slightly higher to remain below the 72 handle in a tight trading range.  The short term trend up towards the 72 handle may not be over, as all eyes are on the RBA meeting later today and the federal budget later tonight. Watch short term support at the 71.30 level to possibly come under pressure:

Oil futures have recovered sharply on the risk on meme, with a big 6% increase in the Brent market taking it back above the $41USD level as short sellers filled their positions swiftly. The daily chart had shown a near certain breakdown but nothing is certain in trading even as price tumbled below the early September lows. It’s not out of the woods yet with the next level to beat above the $43 level or more before calling these falls stopped:

Gold is starting to gain traction with a follow through from its nice boost on Friday as it continues to advance above the $1900USD per ounce level for a two week high.  The next level to beat here to get back on track is the daily/weekly support level that eventually broke at the $1930USD per ounce level:

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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