Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A wobble in the risk complex overnight, put down to concerns over the out of control pandemic in the US but really due to a lack of economic events and/or news about further stimulus from the US Congress. The USD rose slightly while bond yields fell back from their recent run higher as the 10 year Treasury was barreling in on the lofty heights of nearly 1%! Commodities took a stumble however with oil off by nearly 1% although iron ore shot to a new eight year high as Bitcoin vacillated and gold lifted to its pre-breakdown level.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite continued to struggle closing 0.8% lower to 3416 points while in Hong Kong the Hang Seng Index was underwater by nearly 1.2% to 26506 points.  The daily chart was looking set to re-engage above the last nominal high above 27000 points as price support firmed at the 26500 point level but there’s been a stark inability to make any new daily highs which could be spelling trouble ahead here:

Japanese stock markets have moved from going nowhere to selling off with the Nikkei 225 finishing nearly 0.8% lower to 26547 points. Futures are suggesting another decline on the open this morning with the daily chart almost ready to breakdown here as resistance at 27000 points proves too tough to beat:

The ASX200 was the odd one out, continuing its advance well above the 6600 point level to close 0.6% higher at 6675 points.  SPI futures are a bit static on the question of a possible selloff here on the open as the Christmas rally really wants to continue and get past that 6700 point level, but is there a double top pattern forming here on the daily chart?

European markets were unable to gain traction with the lack of resolve in Brexit talks undermining any confidence with the German DAX falling a little over 0.2% to close at 13271 points. While this market remains in stall mode, as support remains firm at the low moving average in the short term, I still remain cautious about the inability to push above 13300 points:

Wall Street had a minor, mixed wobble with the NASDAQ up by 0.4% but industrials pulled back with the S&P500 closing 0.2% lower, unable to beat the 3700 point level, closing at 3691 instead in a very tepid session. This market remains well overbought above the key psychological 3600 point level and ready to go to the moon on a blowout trade but the key in any FOMO rally is momentum and news-flow, both of which are waning:

Currency markets saw a mild uplift in USD strength overnight although it was mixed across the majors with volatility in Pound Sterling over Brexit concerns outweighing a small drop in Euro towards the 1.21 handle. As I said previously, this overstretched breakout is way overdone and while pressure in the short term should equate to a mean reversion trade, I’m still cautious of a major reversion. I’m still watching for signs of a breakdown through four hourly ATR support though:

The USDJPY pair is trying to stabilise here at the 104 handle but took a small round trip overnight that was thwarted as considerable resistance at the 104.40 level and negative momentum on the four hourly chart suggest tougher times ahead:

The Australian dollar had a similar roundtrip, breaking down yesterday before breaking out last night then ending up where it started just above the 74 handle and still well above the last weekly high. The overbought status of the Pacific Peso may be telling here with a possible inversion growing soon as four hourly ATR support remains firm at 73.60, this is the area to watch after any falls below 74 cents proper:

Oil prices are still trying to find strength with Brent crude falling back slightly after being up earlier in the session, closing just below the $49USD per barrel level last night. I did note a one-off warning sign on the daily candlestick could be putting in a top signal, but this has not yet come to pass, requiring at least a break of the low moving average as a violent reversal below the $46 level:

Gold is finally fighting back with conviction, getting back to the pre-breakdown lows at $1860USD per ounce, now a $200 roundtrip for the bottom pickers! Is this enough or just a fill in rally before the next leg down as the longer term charts suggest $1750 from mid-last year is still the next target below if this swing move higher can’t be sustained:

 

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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