Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Normal market price action in the absence of any key economic events would just hinge on the words of central bankers, with the latest FOMC minutes not shaking things up much, but instead it was backtracking on stimulus shutdowns that sent Wall Street surging once more on hopium. Wall Street lifted nearly 2% across the board while currency markets were relatively calm, as gold tried to lift itself off the mat while oil prices fell again on European demand concerns and US over-supply.

Looking at share markets in Asia from yesterday’s session where Chinese mainland markets remain closed but in Hong Kong, the Hang Seng Index continued its own advance, up 0.8% to 24181 points. The daily chart continues to show a swing play that is starting to push aside resistance at the former 24000 point support level which could quickly turn this into a proper uptrend although momentum remains negative:

Japanese stock markets were relatively flat with the Nikkei 225 closing a handful of points lower at 23429 points. Strong resistance at 23300 points remain the key level to beat this week, and with the surge on Wall Street overnight is likely to be broken if futures are a guide as the moving average band continues to tick higher and momentum gets nicely overbought:

The ASX200 had a very solid session, and was the best in the region on the very GDP positive Budget, gaining some 1.3% to finish at 6036 points.  SPI futures are up nearly 30 points on the Wall Street surge and the daily chart is clearly broadcasting further moves above the 6000 point resistance level as daily momentum switches positive. The upside target here is the former highs nearer 6170 points or so:

European markets remained mixed as concerns over the second wave of COVID-19 across the continent continues to weigh, with the FTSE finishing flat while the German DAX lifted only 0.1% higher to close at 12928 points. Post close futures however is showing a potential breakout on the daily chart above the high moving average as price action was bunching up above daily ATR support at 12400 points. Daily momentum is ready to switch to the positive zone here as well:

Wall Street was ready to go from the open as the BTFD crowd stepped in on yet another buying opportunity, backed up by Trump’s backtrack on his previous DickCard move that now promises some stimulus before the election. The Dow and S&P500 finished nearly 2% higher to regain all of their previous losses with the four hourly chart of the latter showing this match clearly.   Momentum has switched back again to overbought levels and price needs to break above the 3420 level to confirm this dip is truly filled or is just hot air:

The four hourly chart of the NASDAQ is more interesting however – no surpassing of the previous highs and indeed, a series of lower session highs that is pointing to a rollover:

Volatility in currency markets was relatively quiet with some USD selling on the back of the FOMC minutes release as Euro bounced off ATR support at the 1.1720 level but couldn’t get past the 1.18 handle proper. That is proving strong resistance as momentum remains positive but not yet overbought and four hourly price action is already rolling over:

The USDJPY pair broke out above the former highs on the risk-on move, briefly breaking the 106 handle along the way as price action stalled at those very overbought levels. Trailing ATR support is ticking up and indicating a new trend is underway but it remains to be seen if that former resistance can turn into firm support in the short term at the 105.80 level:

The Australian dollar was able to clawback a little of its post Budget rout with a small move higher to the 71.40 level where it sits meekly this morning. Momentum remains negative in the short term and price action is still pointing to further rollovers and a re-test of the 71 handle:

Oil volatility continued overnight with a minor selloff that was then filled later in the session on the moves higher on Wall Street, with Brent futures finishing just above the $42USD level. The series of lower daily highs is still spelling trouble ahead here as volatility begets volatility – it must break above the $43 level soon or faces a push below $39 swiftly:

Gold is still struggling to gain traction with an inability to get back above above the $1900USD per ounce level as it traces other undollar assets like the Aussie dollar. This could spell another move lower to the $1850 level as long positions are completely unwound in the short term at least:

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. https://press-files.anu.edu.au/downloads/press/n5314/pdf/book.pdf

    “politically popular policies are not necessarily programmatically effective” – p5

    This whole book is really interesting – goes deep on various policy ‘successes’ in Australia and NZ (I particularly like the case study into the creation of HECS – I had no idea that higher education in Australia was totally free under Whitlam).

    The book illustrates how potent the political assessments of policy (instead of the other two mooted prongs of policy, which are processes and programmatic assessments) are to our politicians. Programmatic assessments are literally “judgements about the degree to which a policy achieves valuable impacts” – i.e. whether the policy successfully achieves the aims it set out to achieve.

    State leaders will continue their stringent lockdowns until they are not politically popular. At the moment, regardless of the purported aims (which become more and more nebulous everyday: is this elimination? ‘aggressive suppression’? Just suppression?) the policy of stringent lockdown remains popular in every state. This is because of the rally round the flag effect:

    https://en.wikipedia.org/wiki/Rally_%27round_the_flag_effect

    Support will only wane after years, not months, of these lockdowns (look at the textbook study of G.W. Bush’s approval ratings during the iraq war). It shouldn’t be surprising to anyone that Mark McGowan has flagged April 2021 as the month of opening WA to the rest of the country, capitalising on the RRTF effect to bolster his chances in the March 2021 WA election.

    As sad as it is to me, and others who are looking longingly to other jurisdictions who have taken a more tempered approach to lockdowns at the cost of more spread of the virus (i.e. Europe), Australian’s have by-and-large supported the lockdowns, and in my estimation, will continue to do so deep into 2021.

    Programmatic/Process assessments do not matter to our politicians. Remember flatten the curve? That was, at the outset, a stated programmatic assessment of the lockdowns. We achieved that in every state and territory – but when the second outbreak occurred, state leaders noted the political advantages of proclaiming their jurisdictions to be ‘covid-free’, re: popularity in the polls. So they started engaging in jingoistic rhetoric (remember ‘QLD hospitals for QLDers?’ Remember ‘why would you want to go to SA?’), slamming the border shut regardless of the consequences, and pursuing increasingly arbitrary case-numbers as a metric for returning some freedoms to the population.

    This whole thing in the Australian context has been nothing more than state-based opportunism.

  2. Stewie GriffinMEMBER

    Just when I thought your memes were getting better…. typical progg wall of text. I’m surprised it didn’t include some footnotes referencing the msm information sources. #LiberalsCantMeme