Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street re-engaged the fear of missing out rally again overnight, sending the S&P500 to a record high in the midst of the coronavirus pandemic at its worst stage (so far). Risk taking didn’t extend to anything else however, with Treasury yields lower while commodities prices were largely unchanged alongside major currency pairs, although Bitcoin is struggling having dropped below the $19000 level.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite struggled to stay in the green, eventually closing down a handful of points to 3410 while in Hong Kong the Hang Seng Index fell back to close nearly 0.7% lower to 26363 points. The daily chart was looking set to re-engage above the last nominal high above 27000 points abut the inability to make any new daily highs is still spelling trouble ahead here so watch for a close below the low moving average as momentum inverts:

Japanese stock markets are also moving nowhere again, this time with the Nikkei 225 finishing about 0.3% lower to 26467 points. Futures are suggesting a small uptick on the open which may not be enough to arrest a serious decline with the daily chart almost ready to breakdown here as resistance at 27000 points still proves too tough to beat:

The ASX200 was able to eke out a minor gain, lifting 0.2% to finish at 6687 points.  SPI futures are jumping at the bit to get going again so the question of a possible selloff is moot as the Christmas rally really wants to continue and get past that 6700 point level:

European markets were unable to gain traction again with a series of scratch session across the continent, the German DAX lifting a handful of points to close at 13278 and going nowhere. Another market remaining in stall mode, as support firms at the low moving average in the short term, I still remain cautious about the inability to push above 13300 points:

Much more confidence of Wall Street however with broad gains across the three main bourses, with the NASDAQ up by 0.5% and the S&P500 closing 0.3% higher to break above the 3700 point level to a new record high. This market remains well overbought above the key psychological 3600 point level and ready to go to the moon on a blowout trade and here we go:

Currency markets are seeing volatility fallback again despite the ZEW survey and GDP prints overnight with both Pound Sterling and Euro almost unchanged in response, the latter deflating a little towards the 1.21 handle. The two week long breakout was way overdone and while pressure in the short term should equate to a mean reversion trade, I’m still cautious of a major reversion. so continue to watch for signs of a breakdown through four hourly ATR support:

The USDJPY pair is trying to stabilise here at the 104 handle but after its recent round trip, price is firming above that level and ready to tackle the considerable resistance at the 104.40 area. Momentum remains negative on the four hourly chart so far, but watch for a break above the high moving average:

The Australian dollar had a small deflating move overnight, heading back towards the 74 handle after a volatile round trip to start the week. Like Euro, the overbought status of the Pacific Peso may be finally rolling over here with a possible inversion growing soon, as the low moving average rolls over and four hourly momentum wanes towards the zero line. The area to watch is any fall below 74 cents proper:

Oil prices are still trying to find strength with Brent crude coming back slightly after its weak start to the week, closing again 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 still fighting back with conviction, this time staying well above the pre-breakdown lows at $1860USD per ounce, by advancing to the $1870 level overnight. Momentum is starting to flat line now however, so its critical that the $1860 level become firm support in the sessions ahead or this will just be a relief rally:

 

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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Comments

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    December 8, 2020 at 5:17 pm
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