Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Month end selling dominated overnight markets but it was also a big bounce in USD fortune that dampened risk appetite, with European stocks off by more than 1% while Wall Street eventually stumbled to about half that loss. Pending home sales in the US surprised to the upside, while commodities were all over the place with oil dropping nearly 2% while copper and iron ore rose despite the rise in USD. Today’s RBA meeting will dominate currency markets locally while the Chinese Caixin PMIs may provide a better catalyst for Chinese stocks.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite was more than 1% higher before its long lunchbreak but then cratered going into the close to finish 0.5% lower at 3391 points. Meanwhile in Hong Kong the Hang Seng Index followed a similar trajectory with a sharp drop of 2% to finish at 26341 points.  The daily chart shows price breaking down from the rising bearish wedge pattern as it falsely broke through resistance at the 26800 point level before yesterday’s inversion, spelling more volatility ahead today:

Japanese stock markets also struggled in their overextended state, with the Nikkei 225 falling 0.8% to 26464 points. Futures are suggesting a further pullback on the open this morning in line with Wall Street, with just a cursory glance of the daily chart providing all the ammunition bears need to short this market going into the new month as momentum finally inverts on a long overdue retracement:

The ASX200 was nearly the worst in the region, closing 1.2% lower to be well below the 6600 point level with resource companies and Qantas hit hard. SPI futures are suggesting even more downside on the open this morning (not helped by option traders still in the dark) as price no longer has firm support at the low moving average as momentum inverts for a swing short trade down to 6400 points or so:

European markets went into selloff mode with 1% plus falls across the continent although the German DAX only lost 0.3% to close at 13291 points. This market is still effectively stalled at the September highs as traders await for someone else to push for a breakout above 13300 points:

Wall Street had a relatively volatile session with tech stocks eventually putting in a scratch session while the S&P500 was dragged down 0.4% to finish at 3621 points, remaining just above the key psychological 3600 point level. The four hourly chart is showing momentum flat lining with ATR support the key level to watch as we start a new trading month:

Before we get to currencies, a quick look at the Bitcoin bubble which after a very short term pop has now re-engaged and then some over the weekend, gapping back up above the $18000 level and now above it previous high at the $19400 level.Four hourly momentum is not yet overextended but technicals don’t seem to matter much with this baby:

Currency markets have inverted sharply with King Dollar asserting his throne once more, and not on much of a catalyst either. Euro was smacked down after nearly breaching the 1.19 handle and has pushed back to its previous mid-week highs at the 1.1920 level. That black horizontal line shows the previous August highs, so we are likely to see this level come under pressure again in the short term:

The USDJPY pair was able to benefit from the strength in USD with its previous pullback almost filled overnight as it filled back above the 104 handle proper. The obvious target is last week’s high at the 104.70 level in the short term:

The Australian dollar was riding the USD weakness wave, but has suffered the same fate as the Euro, smacked down after briefly hitting the 74 cents level after making a new weekly high.  Four hourly ATR support is about to be taken out here going into today’s RBA meeting, but as usual expect the unexpected with a potential fill back to the 74 handle or a drop below to weekly support at the 72.60 level:

Oil prices are still in a blowoff stage after recently pushing aside resistance at the September/October levels and again slightly pulled back overnight with Brent finishing below the $48USD per barrel level. The continues to be a very unsustainable move on technicals alone (let alone the macro settings) and I still think there is a high chance of a violent reversal here soon:

Gold remains in dire straits, as the selloff continues below broken weekly support levels as it accelerates below the $1800USD per ounce level to finish with another new daily low at $1775 or so. The previous large breakout level at $1750 from mid-year is still the next target below, although momentum is way oversold:

 

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)

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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