Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Friday night saw risk markets continue their reversal of confidence as Biden gets closer to taking the presidency and a very large – and taxing (sic) – stimulus package comes forth. The latest consumer confidence numbers doubled down on the weak US economy meme following the initial jobless claims surprise, putting pressure on the Fed and hence the bond market.

As a result, the USD firmed against almost everything with oil and other commodities continuing their pullbacks, with Bitcoin also unable to get back on track after its recent swing play back above local resistance at the key $36000 level. The crypto Tulip replacement pulled back towards the level after trying to make a run towards $40,000 on Friday night with the daily chart showing price still supported, but momentum reverting back from the overbought status. This at a minimum spells consolidation going into this weeks trade, with my eye on ATR support at $32000 as the uncle point:

Looking at share markets in Asia from Friday where the Shanghai Composite fell sharply just after the lunch break but managed to cruise to a scratch session to finish the week at 3566 points. Meanwhile in Hong Kong the Hang Seng Index was having a scratch day but rallied at the close to finish up 0.3% to 28573 points. The daily chart of the latter is continuing to show a lovely breakout but momentum is slowly rolling over from the heavily overbought stage, but price is still well above the high moving average which is usually the stop loss point in these big moves to look to take profit if breached soon:

Japanese markets took some heat out of recent gains with the Nikkei 225 closing down 0.6% to 28519 points. As I said last week, currency volatility may not be playing that big a role here with new record highs funding the FOMO trade and while I’m still targeting the obvious 30000 point level here, Friday’s session was a little jarring when reading momentum levels, so watch for the low moving average at around 28000 points proper to come under pressure this week:

The ASX200 was up by more than 0.3% going into the close but eventually finished flat at 6715 points, closing out the week above the 6700 point level. SPI futures are indicating a pullback on the open on Monday due to the falls on Wall Street, so while the daily chart has a clear bullish rectangle pattern the lack of any upside is weighing still, with momentum flat-lined:

European markets sold off immediately across the continent and in the UK, with the FTSE down 1% while the German DAX was nearly the worse off, down 1.4% to finish at 13878 points, proving that resistance at 14000 points is just too strong. The stall has turned into a rollover here with overbought momentum broadcasting a possible swing play down to ATR support at the 13200 point level:

Wall Street ended the week down across the board, with all three bourses in retreat. The NASDAQ led the way and lost nearly 0.9% while the S&P500 fell back 0.8% to remain well below the 3800 point barrier at 3768 points. The daily chart shows a solid trend post the election that is now being threatened as momentum looks to cross below the overbought status, but this market remains extremely well supported by liquidity. Will the volatility of the upcoming inauguration/impeachment be enough to shake things loose?

Currency markets increased in volatility as the Biden stimulus package reverberates into a stronger USD with Euro selling off sharply to fall well below the 1.21 handle and make for a two week downtrend, now threatening former weekly support/former resistance at the 1.1950 level. The daily chart is clearly showing a breakdown here that may be a precursor to wider losses on stocks:

The USDJPY pair however its not following a similar path, remaining somewhat strong but unchanged to the upside and steady just below the 104 handle, which I’ve considered a key resistance level for sometime now. Note on the daily chart the long held downtrend from the 2020 highs that is still not under threat:

The Australian dollar had a minor pullback to the 77 handle on Friday night, still unable to breach overhead resistance at the 78 level for several weeks now. The daily chart shows this natural resistance level and the first breach of the daily overbought momentum reading since early November 2020 that could spell trouble ahead. Watch the low moving average on the daily chart here just below the 77 level proper for signs of a wider breakdown:

Oil prices pulled back more so than expected on the USD strength with Brent crude dropping sharply to be below the $55USD per barrel level in almost two weeks. While its still above the pre COVID February 2020 level (upper horizontal black line) with strong medium term support I have been warning of momentum showing signs of a rollover all last week – is the low volatility about to go to 11 on the dial?

Gold remains the biggest loser as it puts in another proper breakdown session on Friday night, breaking below the $1830USD per ounce level after having no direction all week. As I said last week, basic price action just did not look good for the shiny metal and I would suggest we are on track to get back below the $1800 level very shortly:

 

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. Looks like the GLE restructuring was officially approved. Surprising that MG has kept his timetable for once.

    Not that I am complaining.

  2. It will take a few years of ultra low interest rates but Aussies will get the message to put their stored excess labour into something real…..Swiss are getting the message

    https://twitter.com/RMKOutFront/status/1350858440848125955

    Expect every bank to join with someone like Afterpay because wages will remain stagnant, so easy but not cheap credit will replace wage rises unless the ALP gets religion again ( This is looking more and more like official policy )

  3. Stewie GriffinMEMBER

    No Tether printed since the 13th – I am extremely doubtful that BTC can rise materially from this point without additional printing.

    That said USDC or Circle’s stable coin (part of @Jack of twitters investment portfolio via his Square holdings) has printed around $350m in the meantime.

    https://twitter.com/usdcoinprinter