Macro Morning

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Markets restarted the week with volatility, as hopes and fears over stimulus and 2nd Trump impeachment collided with the USD providing the safe haven of choice. Oil prices came off only slightly as a result while other commodities pulled back, but the real news was in “stable next currency to replace everything” Bitcoin. After breaching the $41,000 level for a new high it gapped down yesterday and kept falling, off by more than 20% before rebounding to the $34000 level earlier this morning. Can it back on trend?

Looking at share markets in Asia from yesterday where the Shanghai Composite was looking to put in a scratch session but fell sharply going into the close, down 1% to 3531 points, while in Hong Kong the Hang Seng Index was looking to breakout even further but was pulled back to finish only 0.1% higher at 27901 points. The daily chart is showing this breakout easing off slightly into a more sustainable trend as momentum reverts backs from its levels, with the possibility of a pull back below the high moving average rising if this risk averse mood continues:

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Japanese stock markets were closed with Nikkei 225 futures suggesting a pullback towards or even below the 28000 points level after its recent clear breakout on the daily and weekly chart. Again its time to watch Yen which remains under pressure but maybe topping out so the end of this tailwind could spell reduced upside going ahead:

The ASX200 was the standout, unable to comeback after a seemingly good retail sales number and losing nearly 1% to finish just below the former 6700 point barrier. SPI futures are in retreat mode still and while the daily chart has formed a nice rectangle pattern here, with clear uncle and breakout points to trade around, the lack of any upside is weighing as momentum inverts back below the overbought levels usually required for a breakout:

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European markets were red across the board last night as concerns came back regarding possible US stimulus with the FTSE down 1% while the German DAX was 0.9% lower at 13928 points. The solid push above the previous highs as it reaches the 14000 point level was considerably overbought but this is only a minor retracement as price remains supported well above the low moving average (the usual uncle/tightening point when getting out of trends):

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Wall Street fell with the NASDAQ off by more than 1% as the S&P500 took back its previous gains to close 0.6% lower, just below 3800 points. The four hourly chart shows only a small hesistation here 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 were left to focus on macro/political events with a lack of economic releases, with the strong USD weighing significantly on the Euro which dropped below the 1.22 handle and settled at the mid 1.21 mark this morning. This takes out weekly support at the 1.2170 level but the conditions are ripe for a short term swing play higher:

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The USDJPY pair is starting to decelerate out of its rebound, able to push above the 104 level but starting to run out of steam here despite the stronger USD. This keeps it well above the late December false breakout high and considerably, but I’m still wary of recent price action that shows 104 is a key resistance area, at least in the short term:

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The Australian dollar was also unable to hold onto its recent overbought gains with the stronger USD pushing it below the 77 handle but only just overnight. This kicks it out of the recent trend channel even as commodity prices remain very well supported, but the Pacific Peso maybe reverting to a risk proxy in the short term as momentum goes negative. I’m watching for another session low below the 76.60 as a precursor to a broader sell-off:

Oil prices were getting very frothy and pulled back slightly overnight on the stronger USD with Brent crude dropping below the $56USD per barrel level in a small retracement. This keeps it well above the pre COVID February 2020 level (upper horizontal black line) with medium term support continuing to firm here:

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Gold remains the biggest loser and almost crossed below the $1800USD per ounce level overnight, before finding some support to finish just above the $1840 zone nevertheless with a new daily low. This is not looking good for the shiny metal, but those long tails in recent days do support some short term support at least, so watch for any price action that firms here:

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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)

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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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