Macro Morning

See the latest Australian dollar analysis here:

Australian dollar badly lags commodities rocketship

Last night saw a solid reversal in USD, blamed in part on the Fed with several speeches by Federal Reserve officials overnight putting a hawkish bent on their position in 2021. Furthermore, US Treasury yields fell back on some soft auctions with bond markets starting to broadcast further volatility ahead. Oil prices lifted again alongside other commodities pulled back, with Bitcoin trying and failing to get out of its recent funk, still below the $34000 level this morning. The four hourly chart shows clear resistance at the $36000 level that was only briefly breached before pulling back to the recent lows as momentum remains negative. Any fall below the $33000 level will IMO see a return to $30000 very fast:

Looking at share markets in Asia from yesterday where the Shanghai Composite rallied after the lunch break, then shot higher towards the close to finish more than 2% higher at 3608 points, while in Hong Kong the Hang Seng Index was able to burst through the 28000 point level, finishing more than 1% higher to 28276 points. The daily chart is showing this breakout re-engaging after easing off slightly in the previous session, as momentum remains heavily overbought but that trend channel looks great so far:

Japanese markets return from yet another holiday with the Nikkei 225 putting in a scratch session, closing a few points higher at 28164 with futures suggesting a flat-ish start to the session today and perhaps a pull back below the 28000 points level. Again its time to watch Yen which was strongly bid overnight after the USD fellback, so this could be a strong headwind today, plus the machinations around the BOJ slashing GDP forecasts:

The ASX200 was again unable to gain traction, falling some 0.3% to 6679 points. SPI futures are in retreat mode again 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:

European markets were again red across the board last night but the falls were quite modest with the FTSE taking most of the heat, falling 0.6% while the German DAX basically put in a scratch session to finish at 13925 points. The solid push above the previous highs as it reached the 14000 point level was considerably overbought and this retracement is slowly rolling over, even as price remains supported above the low moving average (the usual uncle/tightening point when getting out of trends). Caution here:

Wall Street had a similar modest session, but to the upside instead with the NASDAQ the best, finishing 0.3% higher while the S&P500 put on only point to remain just above the 3800 point barrier. The four hourly chart was showing only a small hesitation above the previous high but that maybe turning into rejection as resistance at the 3800 point level further firms:

Currency markets took a wild swing away from USD strength in co-ordinated action overnight (basically putting any currency trader in effectively one position) with the Euro zooming back above the 1.22 handle in a strong 50 pip plus move higher. This brings it back above weekly support at the 1.2170 level with a lovely swing trade in play here until the 1.2250 level can be breached for a more sustainable uptrend:

The USDJPY pair was poleaxed overnight with a steep selloff that had almost no warning following the hawkish Fedspeak, pushing straight below the 104 level. While this keeps it well above the late December false breakout high, as I said yesterday I’m still wary of recent price action that shows 104 is a key resistance area, and perhaps more of a medium term version that the short term one I positioned for:

The Australian dollar was able to get out of its recent funk with a big move higher last night to get the Pacific Peso express train back on schedule. Commodity prices remain very well supported, and the Fedspeak is helping the Aussie maintain some strength here despite overall risk proxy remaining a weak factor. The target here on the upside is the former high at the 78.20 level:

Oil prices re-engaged after their very slight pullback with the Brent crude contract getting back above the $56USD per barrel level in a solid bid higher. This keeps it well above the pre COVID February 2020 level (upper horizontal black line) with medium term support continuing to firm here:

Gold remains the biggest loser despite the reversal in USD with quite a weak move higher, only gaining about $20USD to be just above the $1850USD per ounce level. I still contend this is not looking good for the shiny metal, even if those long tails on recent daily candles do show some short term support at least, its nowhere near out of the woods yet:


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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