Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The inflation bear swatted down stocks on Wall Street overnight as the latest monthly US CPI figure spooked risk markets as it made a 12 year high, boosting bond yields alongside the USD. This confirmed the markets fear earlier in the week that inflation expectations were getting high, and while the Fed looked through the latest print as “transitory” the wider risk taking complex has seen it as a signal that tapering and higher interest rates are around the corner quicker than expected. The Australian dollar fell sharply, although commodities were mixed with oil and iron ore still climbing, while copper and gold prices fell back but the latter has remained above the key $1800USD per ounce level.

Bitcoin broke below the $54K level and the nascent trend channel that was trying to recover back to the previous $60K high overnight as sentiment sours. Momentum is now in proper oversold levels but price action has not fallen below the previous weekly low so this provides an unconfirmed setup so far:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was again the standout, closing nearly 0.6% higher to 3462 points, while the Hang Seng Index also bouncing back, up nearly 0.8% at 28231 points. Despite the fill, futures are indicating a drop today on the open as daily momentum remains in the oversold zone, with price still near the March lows (solid black line) so watch for a potential follow through below that level:

Japanese stocks are still taking the biggest hits however, with the Nikkei 225 closing 1.6% lower to 28147 points. The daily futures again don’t look very promising at all as momentum goes deep into oversold mode with a big unwinding evident for today’s session. This could be a major breakdown and take out all of 2021’s gains so far:

The ASX200 continued its own mild selloff, only losing 0.7% this time to still finish above the 7000 barrier level, or 7044 points. SPI futures however and overall risk sentiment is pointing to a break below the 7000 point level and the low moving average on the daily chart, but the key area to watch for this dip is the weekly highs at or around the 6900 level:

European markets weren’t as dire with some better than expected regional growth numbers and UK GDP not dropping as much as expected. The FTSE gained the most, up 0.8% while the German DAX finished 0.2% higher at 15150 points. The psychologically important 15000 point level is still being supported as sentiment remains mixed while momentum readings remain oversold here, so watch for a proper capitulation below that area daily ATR trailing support:

Wall Street however had a bad day with all three bourses dropping 2% or more, the NASDAQ hit with a near 3% drop taking it back to its April lows. The broader S&P500 fell just over 2% to 4063 points with the daily chart showing a clear breakdown of the mid April support and daily ATR support levels. The next level down is the March resistance areas at the 3950 point level:

Currency markets had been stabilising after last week’s US jobs reports and the initial tech stock falls but it all changed overnight with the release of the latest US CPI print with USD surging against almost everything. Euro plunged straight through the 1.21 level as I expected, but this just takes it back to its pre-NFP breakout level from last week. More bad news is good news for USD is required to see this hit the 1.20 handle soon:

The USDJPY pair brokeout through and matched its previous weekly high at just below the 110 level overnight on the inflation print. Short term momentum was oversold but this violent swing higher could be over before it finishes with resistance at this level probably too hard to beat. I’m watching for a reversion to the 109.50 level in today/tonights session:

The Australian dollar was a major casualty however, dropping through the 78 handle and taking out ATR support on the four hourly chart, unwinding the latest breakout. The next level to watch for is weekly support (lower solid black horizontal line) at the 77 level, but iron ore prices continue to go higher:

Oil prices stabilized yet again overnight without any significant intrasession volatility as Brent crude picked up a little to almost break through the $68USD per barrel level. Daily momentum is now getting into a proper overbought stage as price action continues to firm here so don’t be surprised if we get a violent breakout soon:

Gold was being restrained by a strong USD in the last couple of sessions with no new substantial daily highs and in the wake of the higher inflation print, has now turned around and sold off to close at the $1815USD per ounce level.  While the advance on its recent breakout above the psychologically important $1800USD per ounce level is not yet over, I have been warning that momentum is way overbought so a small reversion to the mean trade back to the low moving average is not to be unexpected:

 

 

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. Help please Chris, or brains trust…. I’m out of touch.
    Who’s a reputable Futures dealer out there nowadays – (Please don’t say MF Global Corzine…..Fkn).