Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Another night of selling on Wall Street and across the Atlantic in Europe on risk aversion around the burgeoning 2021 COVID crisis as the WHO let out a stark alarm about the growing number of cases worldwide. The previously on the ropes USD bounced back slightly with Euro falling from its six week high as US Treasury yields fell back on safe haven bids across the bond complex. Commodity prices all fell back in unison due to the higher USD although iron ore made a ten year high!

Bitcoin is trying to fill its near 20% drop on the back of the Turkish ban over the weekend, with the four hourly chart showing a potential bottom forming here above the $53K level. The neckline to watch is a very clear $57K zone formed by the the recent session highs so watch for a potential violent breakout on sentiment alone:

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite was up slightly going into the close but managed to eke out a scratch session instead, falling 0.1% to 3472 points while the Hang Seng Index did almost the same, closing just a handful of points higher at 29115.  Futures however are presaging another pullback this morning with price action unable to get back above 29000 points and return to the March highs as daily momentum readings remain negative. Note those big red tails above the last two days of activity – a bearish sign that the low moving average is likely to be broken soon:

Japanese markets continued their struggle against a much stronger Yen, with the Nikkei 225 falling nearly 2% to finish at 29100 points. The daily chart shows futures indicating another big move below with a probable return to the dip lows in mid-March as this market oscillates between fear and hope:

The ASX200 also couldn’t gain ground as its own domestic currency woes provided too strong a headwind with the bourse losing 0.7% to almost fall below the 7000 point barrier. SPI futures are down over 1% or 90 points in response to the overnight rout so we’re likely to see that new 7000 support level broken today and a possible return to former resistance and better monthly support at the 6850 point level:

European markets retreated in unison with some big falls across the continent with the German DAX losing 2% to finish at 15129 points. This market and its hangers on are also oscillating around sentiment on COVID and while daily ATR support is still very firm at the 15000 point level watch for correlations against Wall Street to possibly break price down below that level shortly:

Wall Street stumbles turned into a wider selloff with the NASDAQ leading the way to again to finish 1% lower while the S&P500 lost 0.7% to close at 4134 points. That straight line on the four hourly chart with support at the 4130 level has been decisively broken and could spell trouble ahead. There is tentative support at the 4100 point level (note the long tails below holding there) and that’s the key area to watch later tonight for signs of a further rollover:

Currency markets had a calmer night although Pound Sterling lost ground on firmer employment prospects while the Euro fell back from its big highs against USD but still remains above the 1.20 handle in the process.   This also keeps it well above the previous resistance high level reached in early March, but watch trailing ATR support just below the 1.20 handle plus momentum rollovers for signs of a possible swing play in the days ahead:

The USDJPY pair tried to break out as a result of slightly stronger USD but this was temporary with a return to the start of week lows just above the 108 handle as it continues to have a headwind effect on Japanese stocks. Daily ATR support remains properly breached, alongside negative momentum and the March support levels so watch for another potential breakdown:

The Australian dollar reversal was the highlight overnight as the major risk off event with a sneaky peak above the 78 handle thwarted and then sold off sharply – 100 pips nearly – to take it back below the previous weekly high. This sort of price action confirms my contention the previous selloff hasn’t finished yet:

Oil prices were trying to push slightly higher but failed to find a solid bid overnight with Brent crude pushed below the $67USD per barrel level. The daily chart was showing more signs of a proper recovery here but daily momentum is not yet overbought so this could just be a relief rally as psychological support at $60-61 still holds:

Gold is trying to gain more upside traction with a retest of the late February/early March support level below the $1800USD per ounce level finding some resistance overnight with a mild recovery back to its start of week highs at the $1778 level.  While the longer term charts continue to signal a downside target at the 2019 pre-breakout highs around $1500, this could have more legs on the weaker USD as it reaches the 2020 lows (solid horizontal black line to the left):



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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