Macro Morning

See the latest Australian dollar analysis here:

Janey Yellen smashes Bitcoin

Wall Street is getting quite nervous, having suffered five straight days of declines in a row and was all set to completely rollover last night, but some calming words from the Fed chair abated that decline at the last minute. This is all due to the ructions on bond markets as yields continue to spike, with Aussie government bonds now in the spotlight at a post-COVID high.  Oil prices slipped higher again while copper pushed to a near decade high price, the Australian dollar jumping along for the ride.

Where to start with Bitcoin? Having zoomed through the $56K level at the start of the week in an obviously unsustainable blip higher, the precious crypto has fallen through the $45K level, or off by 20% in less than three days. Its now hovering at the $48K level, the four hourly chart showing extreme price session lows touching the $45K level four times now for a deceleration, but where it goes from here?  :

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite eventually finished down 0.2% to close at 3636 points while the Hang Seng Index was up nearly 2% at one stage, but still closed over 1% higher at 30632 points. The minor pullback to the 30000 point level has seemingly stopped although I think we might be in for a repeat of the late January move as the market remains overblown:

Meanwhile Japanese markets are still rebounding, with the Nikkei 225 finishing nearly 0.5% higher at 30156 points, making a new daily high but not yet exceeding the previous high. Futures are pointing to a possible pullback given the stronger Yen, so we could see more heat come out of this market shortly, as a proper reversion to the mean is still well overdue:

The ASX200 finally played catchup, gaining more than 0.8% to 6839 points. SPI futures are down 25 points or nearly 0.4%, although the late surge on the S&P500 might abate some of that fall at the open. I’m still wary of the zooming Aussie dollar providing a big headwind as resistance overhead at 6900 points remains too strong for the overall market:

European markets were again extremely mixed, with peripheral bourses rising slightly while the German DAX fell back again, dropping 0.6% and resigning itself to remain below the 14000 point level again at 13864 points. Price just can’t back above that level as those former highs in early January continue to firm as strong resistance, so again watch for a proper close below the low moving average as the key sign of a rollover:

Wall Street was again all over the place, with the finish line seemingly positive as the headline DOW and broader S&P500 both finishing in the green, but it took some soothing comments from the Fed and big BTFD crowd near the close to clawback a near 2% decline mid-session. The four hourly chart showed a significant decline after price slipped below the 3900 point level and started heading for the next handle at 3800 points. Its not out of the danger zone yet as price needs to break decisively above that downtrend line:

Currency markets saw a slight pullback in the weaker USD meme as improved consumer confidence in the US and Fed Chair Powell’s testimony took a little heat out of Euro, which pulled back to its recent weekly high. The bounce could continue above the 1.2150 level as the key area to push through, but watch the lower moving average if it comes under pressure here for a quick reversal/swing trade lower:

The USDJPY pair tried to put on some returns overnight but only managed a small blip towards the high moving average on the four hourly chart, having bottomed at the 105 handle recently. Momentum was properly oversold so a small swing higher is not unusual, but watch for a failed move that could swing it back down through the recent session lows, with the medium term trend still targeting the previous weekly low at 104.50:

The Australian dollar is staying strong on the back of the commodity boom, resisting any weakness to remain above the 79 handle. Price is way overbought on four hourly and daily momentum readings but is likely to hold here as long as commodity prices remain elevated:

Oil prices remain firm as well with Brent crude plodding along to get almost back above the $65USD per barrel level overnight.  This almost makes a new daily high and could set up a revisit of the upside target at the $70USD per barrel at the 2019 highs:

Gold is trying to find some stability here, helped by the weaker USD as it tentatively remains above the key $1800USD per ounce level, after recently bottoming out at the November low at $1775USD per ounce. Momentum is considerably oversold so there is the potential for a swing back higher, but there’s no medium term buyers here:

 

 

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!

Latest posts by Chris Becker (see all)

Leave a reply

You must be logged in to post a comment. Log in now