Macro Morning

See the latest Australian dollar analysis here:

SocGen: Australian dollar rises “favoured long-term view”

Risk sentiment faded on Friday night across both sides of the Atlantic as European measures to contain COVID ramped up, putting pressure on their respective economies, while the lack of any measures in the US is sending the death toll higher and higher, as Congress does 2/5ths of SFA to engage meaningful stimulus. Wall Street is wavering in confidence, while commodity traders can only see the moon alongside their well bid Bitcoin boosters, now zooming well past the $23000 level in an obviously sustainable move (sic) on the weekly chart:

Looking at share markets in Asia from Fridays’s session where the Shanghai Composite closed 0.3% lower at 3394 points, capping off a strange week,  while in Hong Kong the Hang Seng Index finished 0.7% lower at the 26498 point level.  The daily chart is still tracking sideways but momentum is sliding, with the lack of a substantial new daily high not helping with sentiment. I’m continuing to watch ATR daily support at the 26000 point level as low volatility will beget high volatility ahead:

Japanese stock markets were in stall mode with the Nikkei 225 closing only 0.1% lower at 26769 points. Futures are suggesting another flat start to the week as the daily chart remains poised in a very boring sideways pattern, as resistance at 27000 points still proves too tough to beat. I’m continuing to watch the low moving average at the 26400 point area as a potential breakdown looms:

The ASX200 was the worst in the region, closing more than 1.2% lower to 6675 points, smacking right through the 6700 point level for a poor finish to the week.  SPI futures indicate a very staid start to the week with more downside warranted following the Sydney COVID breakout and immediate lock-downs on travel etc going into what is still likely to be an exuberant Christmas period. I’m watching strong daily support at or just below the 6500 level to hold going into year end:

European markets were united with mild selloffs across the continent and in the UK in the wake of more economic shutdowns in the wake of the COVID breakouts. The German DAX fell back only 0.3%, which barely put a dent in its mid week breakout, closing the week above 13600 points. The breakout is paused for now, but not yet overbought, still with a clear uncle point at the 13000 point level proper:

Wall Street also had mild selloffs with the NASDAQ putting in a scratch session while the S&P500 finished only 0.3% lower at 3709 points, holding above the 3700 points barrier for now as stimulus remains the catalyst to watch.  The daily chart shows price ready to advance above last week’s high after beating 3700 points as momentum is not yet overbought or is this going to turn into medium term resistance and see a flop back down to 3600 points if stimulus measures are underwhelming:

Currency markets are seeing some changing fortunes in various undollar assets, despite the USD wavering and gaining ground against some through the week. Euro was unable to hold on to its end of week flourish, coming back towards but not below the 1.22 handle as some heat came out of this very over-extended move. Momentum has retraced from the overbought status on the four hourly chart, with the low moving average the key area to watch for signs of a proper pullback to start the week tonight:

The USDJPY pair was all over the place on Friday, eventually finishing above the 103 handle again but in an unconvincing fashion as you can see on the four hourly chart. Price is still below weekly support at the 103.60 area (solid black horizontal line below) and despite this bounce-back, ATR resistance has never been threatened so we could see more Yen buying to start the week:

The Australian dollar was able to make yet another move higher,  rising well above the 76 handle before settling just a midge below for almost a new high for the year. This move remains well overbought but still has nothing to stand in its way, as the commodity boom explodes higher in step with risk sentiment and continued stimulus post-COVID. The daily chart does not yet display any firm evidence that this has anywhere to go but up – but I’m still watching the low moving average and terminal support at the 74 handle for signs of a retracement if it comes:

Oil prices can’t be held back any longer as technical resistance is wiped out with Brent crude lifting again to close the week out above the $52USD per barrel level, almost getting back to its start of year position. Momentum remains nicely overbought and with the $54-56 region not that far away we could see it breached before year end:

Gold continued its upside momentum on Friday night and remaining well above its early December highs to settle at the $1880USD per ounce level. Looking at the daily chart, a powerful inverse head and shoulders bullish pattern is forming with the potential to breach the $1930 level in the new year if daily momentum is maintained:

 

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

  1. “This move remains well overbought but still has nothing to stand in its way”

    The terms ‘overbought’ and ‘oversold’ appear to be meaningless.

    • True for FX, where momentum readings can go further than with stocks (probability speaking when you back test momentum factors), and I’m only relating to specific momentum indicators when I talk about that.

      • robert2013MEMBER

        OK so they are related to specific technical indicators rather than being a commentary per se – makes more sense now.

    • The only way I can work OB/OS is to move up in TF’s so they’re not stuck to the boundaries. if it still looks structured on the HTF, a small pullback on the OB of the lower TF can be a buy signal. IME.

        • OB = Overbought, OS = Oversold, TF’s = Timeframes, HTF = Higher Timefame. In My Experience.
          Chris is referring to his favourite Momentum Indicator (CCI) which reads as OB when it’s ~ the 200 level – it’s a good indie & it’s been sitting high for a relatively long up leg on the AUD. Note he uses a Combo to call dynamic levels & swings, & Momo to gauge their strength or whether the move’s possibly(?) topped out on that TF.

  2. There was an ad on a bus shelter that said: “when you see Bitcoin in an ad, it’s time to buy” or workds to that effect….. surely that has to be the top?