Macro Morning

By in Australian Dollar, Australian Shares

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See the latest Australian dollar analysis here:

Australian dollar parties as assets melt-up

Stocks were all over the place last night with Wall Street diverging sharply as the tech bubble continues to deflate, while industrials were bid higher alongside a big surge in European stock markets. This follows a big selloff in Chinese shares but a lift in local markets – the correlations are all over the place! The bond market remains in flux with ten year Treasury yields still range trading through the 1.6% level while the USD continues to dominate against all of the major currencies. Oil came back after its start of the week move higher on the back of OPEC cuts while gold heads sharply below the $1700USD per ounce level.

Bitcoin is again trying to breakout above the $52K level that failed last week with a good start following weekend trading. The daily and four hourly charts are definitely firming here with daily support still a long way off at the $42K level:

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite fell down fast, closing more than 2.3% lower at 3409 points while the Hang Seng Index almost did the same, closing nearly 2% lower at 28540 points.  The restrictions on trading are probably to blame again given the lack of correlation with other risk markets with the daily chart tracking lower as this series of new daily lows and negative daily momentum points to a possible return to the January lows at just above 28000 points:

Japanese markets are falling too with the Nikkei 225 closing 0.4% lower to break through its three month long uptrend at 28743 points. Futures are pointing to a slightly lower start this morning given the lack of a solid direction on Wall Street. This trendline is key and while only a nominal break with some intrasession buying support, the negative daily momentum readings are pointing to a follow through shortly:

The ASX200 was the odd one out, actually finishing 0.4% higher at 6739 points. SPI futures were indicating a much bigger finish – more than 100 points  – and are again bullish, up nearly 50 points despite the big falls on the NASDAQ. This maybe just Australian dollar weakness finally catching up with the daily chart remaining messy here as we again try to push through heavy resistance again at or around the 6900 point level:

European markets were all bullish despite a much weaker than expected German industrial production print, but this is all about the decline of the Euro with the German DAX standing out again with a huge 3% plus move higher. This time it has solidly broken above resistance at the 14000 point level with a big – maybe too big – punch through as momentum goes nearly off the charts:

Wall Street’s fortunes are diverging quickly, with the NASDAQ slumping 2.4% to fall to a new monthly low, having lost nearly 10% in the last 30 days. The daily chart shows a bearish engulfing candle that will weigh on the market on the open tonight with the 11000 point trading zone pre-election in late 2020 the downside target here:

The S&P500 however fell back 0.5% while the headline Dow lifted more than 1% with risk divergence and rotation the name of the game here. The four hourly chart shows the nascent bounce off the lower trend channel and back above tentative daily support at the 3800 point level now finding stiff resistance at the 3860 point level at the upper end of the channel:

Currency markets remain volatile in the wake of a very strong USD with the Euro plunging again last night, pushing right through the 1.19 handle that remains overdone, but not finished:

Conversely, the USDJPY pair is still shooting higher, this time ready to burst through the 109 handle in what should be a good tailwind for Japanese stocks, as this equates to the mid 2020 high. Any warnings about overdone price action and momentum are just that, not proof that this is over yet as it tosses aside short term resistance that was building at the 108.50 level:

The Australian dollar fell back but is still finding a modicum of support at the 76.50 mid level although this is again under attack as we start trading this morning. New weekly lows as the USD remains too strong amid higher commodity prices cannot help this currency at the moment:

Oil prices went a bit too high on Friday night and the inevitable pullback on profit taking has seen Brent crude push through the $71USD per barrel level before pulling back to just below the $68 level in what could be exhaustion and the first stage of a larger correction. The 2019 highs at the $74 level still look good:

Gold fell back sharply to fall below the $1700USD per ounce level as it can’t find any buying support. While momentum remains considerably oversold there is no upside potential here save a very short term short covering move, with the longer term chart is more illustrative of where this can go (aka the 2019 pre-breakout highs around $1500):

 

 

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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