Macro Morning

See the latest Australian dollar analysis here:

Australian dollar parties as assets melt-up

Wall Street’s nerves were calmed, soothed and appeased by the Fed last night as Chair Powell patted and stroked the risk complex as it purred along nicely again.  The Treasury bond market saw another blip higher in 10 year yields, while the USD was largely unchanged, several currencies did make new highs – especially the Aussie as it soars towards the magical 80 cent mark.

Bitcoin trading has been fun so far this week and we got some stability overnight with a failed breakout above the $51K level before reverting to the lower edge of the trading band at the $48K level, so volatility is dropping, but this has all hallmarks of a big drop lower towards or even through the $45K level:

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed just under 2% lower at 3564 points in response to some local share trading rule changes while the Hang Seng Index completely flopped, sinking nearly 3% to be well below 30000 points for similar reasons.  This looks like a classic blowoff topping action, but has yet to fall below the low moving average or for momentum to invert violently. If price action remains anchored at the 30000 point level then its out of the woods, but that trading rule change might be too much to bear (sic):

Meanwhile Japanese markets couldn’t escape the carnage, with the Nikkei 225 finishing 1.6% lower at 29671 points. Futures are pointing to a possible recovery here though in line with Wall Street’s move higher overnight, as Yen remained weak against USD as well. Most of the heat has been taken out of this market, although a further correction down to trailing ATR daily support at 29000 point is still possible:

The ASX200 was the best in the region, relatively speaking, losing only 0.9% to be back below the 6800 barrier at 6777 points. SPI futures are up over 40 points or 0.6% higher, so another oscillation is again on the cards, despite a very high Aussie dollar still providing a big headwind as resistance overhead at 6900 points remains too strong:

European markets were green across the continent as risk appetites returned with the German DAX moving 0.6% higher to just below the 14000 point level but pipped above in post-close futures. Price needs to breakout above the former highs (solid black upper horizontal line on the daily chart below) from early January, which are still very strong resistance, but no new weekly low is providing a lot of technical support so far:

Wall Street was united this time with the headline Dow 30 up over 1% while the NASDAQ and broader S&P500 put on exactly 1% with the latter finishing at 3925 points. The four hourly chart was showing a significant decline after price slipped below the 3900 point level and started heading for the next handle at 3800 points before the BTFD Squad stepped up to the plate and hit a softball from the Fed to get the market out of the danger zone as price broke decisively above that downtrend line:

Currency markets saw a mixed result from USD strength/weakness, with the DXY Index unchanged but lots of machinations across the various majors. Euro swung back down to the 1.21 handle and then returned to almost make a new intraweek high, with this bounce wanting to continue above the 1.2150 level. That false breakdown last night could be setting up for a violent swing higher so watch the 1.2180 level:

The USDJPY pair conversely was able to put on some returns overnight pushing through but not sticking above the 106 handle or the previous weekly high. This maybe telling or just the first attempt before it pushes through, but I’m still watching for failed moves 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 going all Bitcoin with a big surge overnight taking it to yet another new high, almost busting through the 80 handle as a result.  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 also firmed higher with Brent crude pushing through to a new daily and weekly high, getting above the $66USD per barrel level overnight.  This sets up a revisit of the upside target at the $70USD per barrel at the 2019 highs, with almost no short positions left in its way:

Gold is struggling to find some stability here, not helped by the USD as it tentatively remains above the key $1800USD per ounce level, but failing to make a new daily high 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!

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Comments

  1. The crunch comes when their economy opens up………..a lot of people still not paying their rent and bills and unemployment benefits are taxable, and effect ACA payments……not normally much of a problem but the time frame is much greater this time

    https://twitter.com/ScottyBelhorn/status/1364525027538984962

    The much vaunted inflation will probably look like this in PCE terms….all those personal savings will have to go on forbearance payments

    https://twitter.com/AnalystDC/status/1364672578183454729/photo/1

  2. Chair Powell …….. is a tool.
    He puts on his elephant suit every time the market looks like it wants to start to become more rational.