Macro Morning

See the latest Australian dollar analysis here:

Goldman: Australian dollar close to top

Markets ended a tumultous week with some firm moves higher on Friday night in response to the latest US unemployment data, with commodities moving around the most as stocks lifted firmly into new record highs across Wall Street.   Oil prices went into super overbought mode with both Brent and WTI lifting more than 3% higher while Bitcoin breached the $41,000 level for a new high before topping out over the weekend. It looks set to start the week below the $39,999 level but like the last “this is the top” technical signal, is this just a pause before another attempt higher? $50,000 next?

Looking at share markets in Asia from Friday where the Shanghai Composite fell sharply going into the close before recovering to finish the week at 3570 points, while in Hong Kong the Hang Seng Index went the other way and closed 1.2% higher to 27899 points. The daily chart is showing this breakout has more potential even as momentum remains at way overbought levels, there is still the possibility of a pull back below the high moving average but the new key support level is now 27000 points at former resistance:

Japanese stock markets surged with the big selloff in Yen helping the Nikkei 225 move 2% higher to 28139 points, a clear breakout on the daily and weekly chart. Futures are suggesting more upside so we’re likely to see another new monthly high again although momentum is getting ahead of itself, Japanese equities remain far more attractive than bonds:

The ASX200 kept above the former 6700 point barrier by rising 0.5% to 6748 points, with SPI futures supportive of more upside to start the trading week today and a possible move to the 6800 point level. The daily chart has formed a nice rectangle pattern with clear uncle and breakout points to trade around as momentum remains positive and signals a breakout:

European markets were green across the board on Friday night with solid gains across the continent and in locked-down UK, the FTSE lifting only 0.2% while the German DAX was 0.5% higher at 14049 points. The solid push above the previous highs as it reaches the 14000 point level is now considerably overbought but nothing is holding back equities supported everywhere by liquidity, despite the continued pandemic:

Wall Street had a minor wobble before recovering post the NFP release, lifting to new record highs with the S&P500 closed 0.55% higher to remain well above the 3800 point barrier at 3824 points. The four hourly chart shows a clear breakout above the previous high as the S&P500 wants to accelerate further, but stops remain quite wide as volatility remains in check until Trump is kicked out or leaves:

Currency markets focused squarely on the NFP release with USD winning out against most of the majors, particularly Euro which continued its mid week selloff to get back towards the 1.22 handle, making a new weekly low in the process. This sets up for more downside, but possibly only to weekly support at the 1.2170 level:

The USDJPY pair previously lifted out of its week long selloff, but was unable to advance any further as it went towards but not above the 104 level. This keeps it above the late December false breakout high and while considerably overbought has the potential for more upside, but I’m wary of recent price action that shows 104 is a key resistance area, at least in the short term:

The Australian dollar is still unable to hold onto its recent overbought gains with the USD pushing it back towards the mid 77s in a move that was defensive overall, not making any new lows in the process. This keeps it in the middle of the trend channel and holding on here as commodity prices remain very well supported as is the risk on mood on Wall Street which combine to give the Pacific Peso a great boost with the move to the 80 cent level still on the cards in the medium term:

Oil prices are now getting very frothy indeed post the Saudi cut, OPEC+ meeting and now the trillion dollar plus stimulus the Biden Administration is likely to lead with with Brent crude pushing aside all short sellers to finish the week above the $56USD per barrel level. This is now well above the pre COVID February 2020 level (upper horizontal black line) with medium term support continuing to firm here as this breakout continues unimpeded:

Gold however was the biggest loser on the night, falling sharply once more and wiping out more than half of its recent relief rally gains to finish at the $1850USD per ounce level. As I said last week, watching for a break below the $1900 level next as the false breakout got WAY ahead of itself. Where to next? Probably the former lows visited last November as the longs have abandoned precious gold for bubblicious Bitcoin:

 

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!

Comments

  1. bought more BBUS this morning. fck it. this is insane now. Everyone is shutting down – everyone but the markets.
    And to my disbelieve people pushed PXX to levels that it should not trade so I sold.

    • NoodlesRomanovMEMBER

      Hey Niko – how deep into BBUS and similar are you? (% of portfolio, no need for $ numbers). Short securities/derivatives are about ~0% of mine right now and I’m looking to rebalance.

      • 30% BBUS and 70% shares of the funds deployed not of all funds available. I keep lot of cash. Bought few NCM for $26 this morning and sold rest of PXX at profit to my amusment.

        • NoodlesRomanovMEMBER

          Thanks mate – I’m a Commsec chump, and for the first time ever came up against my trading limit in trying to buy a bunch of BBUS. Apparently if you aren’t buying ASX10 you can’t buy more than your current portfolio worth, and I’d sold down so much that I’m just hanging on to a couple of stinkers that I have too much ego to close out and get a definite loss on, and triggered the limit.

          • I am Commsec1 customer and can trade about double of what I am worth. I hit limit few times during day trading.
            Hope I am right with my BBUS positions. Things just don’t look good but markets are pricing 200 years into the future. Futures started to look promising, but they can turn around in an instant. All it takes is for Biden to go out and tell the MSM he will now push for $3k stimulus as $600 and then $2k was not enough.
            Gold action is very interesting though.

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