Macro Morning

See the latest Australian dollar analysis here:

Australian dollar parties as assets melt-up

The USD reversed course overnight, with Euro in particularly shooting higher on the back of firm EZ wide inflation figures, although German retail sales disappointed. Wall Street got the stumbles and stalls though as Treasury yields were ranged bound overnight. Commodities were mixed with copper rising nearly 3% while oil came off slightly again as gold bounced slightly on the weaker across the board USD, pulling the Australian dollar up as a result as yesterday’s RBA meeting amounted to little.

Bitcoin volatility remains relatively low with a range bound 24 hours around the $48K level with a downward bias, clearly evident on the daily chart as those long tails above indicate a lot of selling action. This is still setting up for a major breakdown this week if confidence falls, and it fails to beat the midweek highs of the previous week at the $51K level soon:

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite finished 1.2% lower at 3508 points while the Hang Seng Index did the same, closing at 29095 points, as it fails to gain any momentum.  This puts the markets in a perilous position, with the daily chart showing price unable to get back above the 30000 point level as the overall price action sets up a bearish head and shoulders pattern:

Japanese markets were reversing the hardest yesterday, but lifted slightly towards the close with the Nikkei 225 finishing nearly 0.9% lower at 29408 points. Futures are again pointing to a mixed beginning this morning as price will continue to anchor itself nearer trailing ATR daily support at 29000 points in an effort to take some heat out of this run, although I still contend it needs to correct more down to the more sustainable trend line down nearer 28000 points:

The ASX200 was the least affected, down only 0.4% to 6762 points, not helped by a deer in the headlights RBA. SPI futures are up nearly 20 points despite the wavering fortunes on Wall Street, with a very messy picture on the daily chart that still has momentum in the positive zone – but I’m still wary of heavy resistance again below 6900 points:

European markets still managed to put in some meagre gains across the continent, with the German DAX lifting 0.2% higher to remain above the 14000 point barrier at 14030 points. The daily chart shows the market wanting to clear resistance at the 14000 point zone but has failed since Christmas last year, although the daily lows are higher ever since – another go soon or is the higher Euro too much of a headwind:

Wall Street stumbled however with all three bourses falling at different velocities. The NASDAQ led the way and the volatility with a 1.7% drop while the S&P500 finished 0.8% lower to close back below the 3900 points level again. The four hourly chart still shows price unable to clear the downtrend line from the mid February highs as this reflation rally stalls out, watch for a drop below the low moving average at the 3850 area:

Currency markets saw reduced volatility in recent sessions which always means there’s going to be a violent reversal soon, and Euro alongside Pound Sterling has done so – somewhat – after last night’s EZ inflation print, basically moving 100 pips in the last 24 hours to almost get back above the 1.21 handle. This is enough to end the downtrend, but trailing ATR resistance and still negative momentum point to this being a swing rally only, not a new trend yet:

The USDJPY pair remains relatively stable but as I mentioned yesterday, momentum is slowly waning after being overbought for more than a week, with more short term resistance building at the 106.80 level which was rejected again overnight. The next upside target remains the 108 handle which equates to the mid 2020 high, but price action is now gravitating more to the lower bound of the moving average channel, the early signs of a small correction:

The Australian dollar finally got going again following the RBA’s meeting, but this was all about a weaker USD more than a stronger Aussie. Nevertheless this swing move higher has seen it pass through the 78 handle but still nowhere near trailing ATR resistance with momentum still struggling:

Oil prices were hit again on the stronger USD, with Brent crude slipping another 1% to continue its poor start to the week, this time tracing below the $63USD per barrel level.  This wobble is getting larger and may put off the ultimate main target at the $70USD per barrel at the 2019 highs, with a daily close below the low moving average on the daily chart plus momentum inverting indicating this trend is over for now. Watch ATR support closely at the $60USD level which must hold in the short term:

Gold has had a very minor reprieve on USD weakness, steadying overnight at the $1735USD per ounce level. Momentum remains considerably oversold and while there is the potential for a violent upswing here on short covering/profit taking, the longer term chart is more illustrative of where this can go alongside the bond shock:

 

 

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. Hi Chris – are you able to share your thoughts on longer term gold trends that you refer to please ? Thank you.

  2. Today’s AFR has a cracking piece by John Kehoe…

    “His friend’s mother, 80 year old Shirley.

    Lives in a Sydney house worth $5million, has a $2million share portfolio.
    Yet she receives heavily subsidised in-home care and pays only $14 a day to have a personal carer attend for 1 hour.”

    Shirley’s son says “I still haven’t worked out why she gets such a good deal, because she can easily afford to pay more”

    Seriously the largesse thrown at Australia’s pensioner set is bankrupting our younger generations and tax-paying working class… aged pension and aged welfare of all colours needs tighter means-testing – OBVIOUSLY!! This example makes me sick. #IntergenerationalTheft