Macro Morning

See the latest Australian dollar analysis here:

Australian dollar climbs with global stock surge

Risk sentiment came back overnight with both European and Wall Street bouncing back as volatility on bond markets pulled back slightly and the USD continued to lift on the back of strong initial jobless claims overnight. Concerns over the Suez canal supply blockage continue to rattle commodity markets, with oil dropping 4% and copper down alongside gold.

Bitcoin remains under a lot pressure, deflating below the $53K level and looking to retest its recent weekly lows as it can’t get any upside momentum going. The daily chart has flipped to negative momentum for the first time since the start of the year and could be presaging a fall back to ATR support at the $45K level next:

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite put in a minor loss of 0.1% to finish at just over 3360 points, still hovering at a monthly low while the Hang Seng Index is scratching along at the same pace, nearly unchanged at 27899 points. The daily chart shows momentum is pushing into a very overextended zone where we could get a small bounceback on risk reversion so watch for a lift above the 28000 point level to finish the week, albeit in a very tepid state:

Japanese markets  bounced back on a selloff in Yen with the Nikkei 225 lifting over 1% to be back above the 29000 point level. Futures are showing a bullish engulfing candle that alongside a lift in the USDJPY pair and overnight action on Wall Street suggest more upside on the open this morning, which is overdue as this little dip could still extend into a correction way down to the next level of support at the 27200 point level from mid January:

The ASX200 followed Chinese shares with a near scratch session, lifting nearly 0.2% to close at 6790 points. SPI futures are up over 20 points so we’re likely to see a finish above the 6800 point level for the week, but daily momentum and the overall price pattern remain really unexciting and flat here:

European markets were mixed again overnight with the FTSE dropping alongside some peripheral markets, but core exchanges lifted on a mix of new COVID restrictions and lifting thereof, with the German DAX putting in a scratch session to finish at 14621 points. Futures however indicate more upside on the open tonight as Wall Street rallied thereafter with a potential matching of the recent daily highs at the 14700 point level possible, setting up for a new leg higher:

Wall Street was teetering on correction territory but the BTFD crowd came to the rescue, although unusually tech stocks remain under the pump with the NASDAQ barely putting in a positive session. The S&P500 was more lucky however, finishing 0.5% higher to get back above the key 3900 support zone that really needs to hold here. The four hourly chart shows price bouncing back after recently visiting below last week’s session lows with momentum still in the negative zone:

Currency markets continue to see strong USD dominating with Euro again putting in another daily low, finishing well below the 1.18 level overnight in the wake of the solid initial jobless claims. The bearish double top pattern from the last two weeks remains in play with price moving well below the previous weekly low (solid horizontal black lower line) with momentum still nicely oversold and ready for more downside. I do note however that the last three sessions have failed to produce a low below the mid 1.17 level so watch for a potential bounce here:

The USDJPY pair continues to put on gains overnight, heading just above the 109 handle in a much better move as momentum gets nicely overbought on the risk on mood from Wall Street.The next stage is trying once again to beat back resistance at the 109.30 level which could end this little rally:

The Australian dollar is deflating still into a mild area of buying support, remaining below the 76 handle but decelerating its recent big falls. Watching commodity prices should provide some reprieve here, but that is unlikely as the Pacific Peso takes out key support levels on weekly charts:

The bounce back in oil prices was shut down quickly despite the continued Suez canal blockage with Brent crude dropping 4% to be back below the $62USD per barrel level again, with the short covering move already over. I said yesterday this was likely to be temporary with ATR daily and psychological support at $60-61 having been broken with more price downside to be expected as traders reverse their positions:

Gold is still unable to get off the deck, yet again not making any substantial new daily high, closing lower to the $1726USD per ounce level. This short term bounce is nothing more than a small short covering move that can’t even get back up to previous strong resistance at the $1770 level with the longer term chart signalling the next downside target at 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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