Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

A dovish mood from Fed officials overnight sent the USD into reversal mode and helped buoy Wall Street after a disappointing ISM manufacturing print, giving Asian stocks a catalyst to rebound from the poor start to the trading week yesterday. US Treasury yields pulled back again while commodities rebounded on the weaker USD across the board, with oil up nearly 2% as gold almost got through the critical $1800USD per ounce barrier.

Bitcoin doubled down on its Friday night surge, getting above the $58K level yesterday afternoon for a new two week high before pulling back below the $57K level overnight as it wants to get back to its previous highs above $60K. I must say, apart from the relative percentage changes, this is looking quite smooth – almost acting like a major currency:

Looking at share markets in Asia from yesterday’s session, with the Shanghai Composite and Nikkei 225 closed it was all eyes on the Hang Seng Index today which continued its Friday afternoon breakdown, losing nearly 1.3% to close at 28357 points, wiping out the last two months of very modest gains. This puts momentum well into the oversold zone and we could see a retest of the March low at the mid 27000s. The key level to break on the upside remains ATR daily resistance way above (solid red line) and that’s not happening anytime soon:

The ASX200 shot out of the gates at the open unexpectedly before putting the brakes on to finish with a scratch session, closing just above the 7000 point level. SPI futures are indicating a modest open this morning in line with the mood on Wall Street. The daily chart still shows momentum retracing from the previous overbought levels and the low moving average coming under threat which could stall this rally above the previous breakout levels (solid horizontal black line). Today’s RBA meeting could provide a catalyst if too hawkish:

European markets bounced back with a fairly strong session across the continent, with the German DAX closing 0.6% higher to start the week at 15236 points. Sentiment remains poised here and dependent on the direction of Wall Street as usual with daily ATR support still firm at the 15000 point level but caution reigns as momentum readings continue to subside and could be suggesting a breakdown below:

Wall Street was helped by the dovish Fedspeak although the NASDAQ stood out by falling back 0.5%, while the S&P500 finished 0.3% higher but wasn’t able to break back above the 4200 point level. The four hourly chart remains a little unsure of itself with an obvious oscillation and point of control around the 4170 point level with medium term support at the 4100 point level still quite strong:

Currency markets reversed their volatility yet again with a selloff in USD as Euro bounced back above the 1.20 handle which has now firmed as stronger medium term support despite getting slammed back to that level on Friday night. Momentum has retraced from its oversold level as price action remains neutral going into tonights session with a full deck of London traders:

The USDJPY pair was pushed back to the 109 handle in the USD reverse gear change but it stalled out just above four hourly ATR support which indicates a mean reversion instead of a selloff so far. Momentum has also retraced from the nicely overbought stage but as I warned yesterday the lack of buying support as Japanese traders take half the week off might cause a stall here before anymore upside:

The Australian dollar rebounded sharply too, heading straight back to the middle of its sideways trend channel just above the mid 77s overnight. This gives no indication of where traders are positioning for today’s RBA meeting so watch for an unlikely breakout above the 78 level or an equally unlikely breakdown below the 77 level:

Oil prices rebounded to take back most of their previous gains with Brent lifting 1.5% to the mid $67USD per barrel area. This indicates that resistance overhead at the $69 level at the former highs is the real level to watch out for in coming sessions. Watch for support at the low moving average to firm here:

Gold was unable to break above the psychologically important $1800USD per ounce level but was able to match its previous breakout high above the previous support now resistance area at the February lows (solid horizontal black line). This is indicative of more support as daily momentum goes into nicely overbought mode – watch for any daily close above the current level:

 

 

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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