Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Action on risk markets was muted last night due to the release of the latest jobless claims in the US, followed by the post-close Biden stimulus package announcement, with the former unexpectedly nearly hitting the 1 million mark. This has reassessed chances of a taper by the Fed, with bond markets starting to trickle higher as USD came back a little later in the session.

Oil and other commodities continued their mild pullbacks, but Bitcoin kept shooting higher after recently bursting through local resistance at the key $36000 level, it made a run towards $40,000 overnight before wavering this morning. The four hourly chart shows the attempt to get back at the former record high with overhead ATR resistance needing to be cleared soon:

Looking at share markets in Asia from yesterday where the Shanghai Composite was meandering after the lunch break, and then suddenly dived into the close, finishing down nearly 0.9% to 3565 points, while in Hong Kong the Hang Seng Index went the other way, up 0.9% to edge further above the 28000 point level, closing at 28486 points. The daily chart is continuing to show a lovely breakout here as momentum remains heavily overbought with a solid trend channel looks with price still well above the high moving average although starting to look stretched:

Japanese markets continue to break out again to new decade highs with the Nikkei 225 surging more than 1.5%, closing at 28908 points. As I said yesterday, currency volatility may not be playing that big a role here with new record highs begeting new highs as the FOMO trade moves in. I’m targeting the obvious 30000 point level here but note that momentum is off the charts:

The ASX200 was able to finally find some buyers, lifting 0.4% to close just above the 6700 point level. SPI futures remain in steady mode due to the pullback on Wall Street, so while the daily chart has a clear bullish rectangle pattern the lack of any upside is weighing:

European markets were generally positive  with the German DAX putting in another mild lift of 0.3% to finish at 13988 points, but it gave up these gains in post-close futures. This consolidation is turning into a stall here with the 14000 point level turning into resistance even though momentum is still looking good in the medium term:

Wall Street fell back however with the NASDAQ retreating slightly while the S&P500 lost nearly 0.4% to fall back below the 3800 point barrier. The four hourly chart is showing more and more hesitation above the previous high as resistance at the 3800 point level is still looking too strong in my view:

Currency markets increased in volatility in the wake of the initial jobless claims and the Biden stimulus announcement with Euro round tripping down to the 1.21 handle and then back to the 1.2150 level where it started the week. Four hourly momentum is not yet oversold so this could be a bottoming action:

The USDJPY pair followed a similar path, heading down towards the 103 handle in a swift move lower, matching the mid week intrasession low before a small lift higher this morning. I’m still wary of recent price action that shows 104 as a key resistance area as momentum is now heading lower:

The Australian dollar however had a much stronger response and held on to the gains up towards the 78 handle, making good on its steady if a little noisy uptrend since the start of the week. The target remains on the upside at the former high at the 78.20 level with key support at the 76.70 level holding nicely:

Oil prices pulled back slightly on the USD strength coming back with Brent crude remaining just above the $56USD per barrel level overnight. This keeps it well above the pre COVID February 2020 level (upper horizontal black line) and while medium term support continues to firm here, momentum is showing signs of a rollover:

Gold remains the biggest loser as its continues to vacillate around the $1850USD per ounce level without any momentum or direction. 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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Comments

  1. I noticed something interesting how market responded when 10y rates hit 1.18% and triggered money moving into bonds – my understanding is there was solid bid on that day auction despite MB reporting lacklustre auction. I don’t have numbers to back up but most media reported strong demand for 10Y which pushed rates down again.
    If my read of this action is correct then I think we saw where the upper limit of the rates is. Due to shear size of debt I don’t think markets can handle higher rates than 1.25% – 1.5%. If this is true then worse case scenario for gold will be $1600 – $1700 usd and once FED start responding to keep those rates lower and at same time Joe start throwing stimulus after stimulus at everyone that has pulse we should see gold price moving higher and higher and higher.
    Another thing to keep an eye on is how effective vaccines are going to be. At this early stage I see no impact but this is too early me thinks.

    and yeah Polkadot.

    • Central banks were back on deck this week so QE is back on after a hiatus, that was a lot of the bond bid, but you are right $ 40 trillion in debt before this is over means rates stay low until lending becomes spending, i.e. debt write offs. I just can’t see Ms Yellen letting gold run, though she has to drop the dollar as well…….long term dollar needs to halve but the empire won’t like that.
      I sold half my ADN, letting the rest ride.

      • I don’t think Yellen will have a choice as everyone will try to devalue and in that case they all deval against gold. We are all in this together. Lol
        Yesterday I sold all my NCN and bought 500 back at the end of the session. Was buying more this morning as it was falling.
        Biden’s speach reinforced the high taxes for the rich and that will almost certainly mean market falls. Still holding BBUS.

      • It is addressing real demand for IoT, banking, payments etc.. It is scalable, offers interoperability between various protocols, massive throughput (more transactions per second than visa) and is much cheaper than Ethereum.
        If it works as per advertised then it will be the one but there are others that claim can do same I only have limited funds to allocate to crypto so went with Polkadot. Others to keep an eye are:
        Cardano, Solana, Cosmos, Eth2.

        There are few projects launching this quarter and all eyes will be on them if Polkadot can handle them well. Many projects that currently run on Eth are monitoring if Polkadot can deliver and if it does many will migrate to Polkadot in order to bring transaction costs down and take full advantage of scalability Polkadot offers.
        If it delivers and if we start to see projects moving from Eth to Polka then I will start buying with both hands.

        This is my view and I haven’t done very deep research hence why I only allocated few funds. Matter of fact I pulled all my money out and only keep free dots I won from my profits – 410 dots. I buy the dips and sell highs by only withdrawing my principal and some small profit while ensuring to leave few extra carry free dots.

        • Thanks Niko. I’ve (finally) been thinking of putting a few lazy bucks into alts, but I’m following too much ground already. Hence the rejig this quarter.

          • Diversification is for pussies and system hugging betas – when you know you are right go all in !!!

  2. CEL has been moving up for the last few days. I think they will release more assays next week and looks like they may report some decent grades.