Macro Morning

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Overnight saw some upside volatility return to equity markets due to a mish mash of good and bad economic news and some further FedTalk from hawks and doves over the coming tapering (or not tapering) of the US economy, plus the jumbles around the ever interesting labour market. The USD took back its gains against the major currencies, while Wall Street reverted back to its previous levels but still looks weak going into the end of the trading week. Treasury yields fell back ever so slightly while heat continues to come out of commodity prices with oil off another 2% lower as gold continues to outperform the cryptos.

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite put in a scratch session to remain just above the 3500 point level, while the Hang Seng Index returned from its holiday in a dour mood, down 0.5% to 28450 points. The daily chart is still positioning here for a bounce off the March lows as it still needs to clear at least the 29000 point level to turn into a proper new trend:

Japanese stocks were floating along this time with the Nikkei 225 closing only 0.2% higher to 28098 points. Daily futures are looking somewhat promising but price action still speaks to more hesitation and lack of direction ahead, as this market remains in a very cautious state. I’m watching for another capitulation here below the 27400 point level:

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Just like the previous session, the ASX200 moved the furthest, this time lifting more than 1.2% on the latest jobs figures print, closing back above the 7000 point level at 7019 points. SPI futures are up 20 points or more, so we could see a stable session to finish the trading week here, but also a potential rounding top bearish pattern forming:

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European markets bounced back eventually in line with Wall Street with a near 1% plus gain across the continent. The German DAX did the best, closing nearly 1.8% higher at 15370 points taking back most of the previous session’s losses. Even a cursory look at the daily chart shows that sentiment and thus price action is still oscillating way too wildly here to get excited about positions either way until key support or resistance is broken:

Wall Street bounced back on good economic news – strangely enough – but this wasn’t enough to stave off the wider selling we’ve seen all week with the broader S&P500 finishing 1% higher at 4159 points. Price action on the four hourly chart still shows very heavy resistance at the top of the trend channel at the 4170 point level so no reason to get excited about finding a bottom here until that level is breached decisively:

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Currency markets were moved around a little by the latest initial jobless claims and more tapering talk from the Fed with Euro pushing back to its intrasession high above the 1.22 handle overnight. A nice bounce off of ATR support on the four hourly chart at the 1.2150 mid level here could have further legs if resistance is cleared tonight:

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The USDJPY pair had only a short term reprieve from its selloff as that nascent bounce collapsed overnight, sending it below the 109 handle and ATR support at the 108.70 level again for a new weekly low. Four hourly momentum is now into the oversold zone so watch for a return down to the early May lows at the 108.30 area next:

The Australian dollar was able to lift a little overnight in line with Euro and other majors but its not much to talk about as it continues to struggle under resistance above at the 78.20 area, as seen on the four hourly chart below. I’m still watching for a return to last week’s low and for a potential capitulation below the 77 cent level proper:

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Oil prices were pushed lower again overnight, following the 3% plus falls previously with Brent crude finishing just below the $65USD per barrel level in this follow up downturn. This may well confirm the double bearish top pattern on the daily chart and as I said yesterday, a second close below the low moving average at the $67 level could spell a return to the $60 level in a small correction:

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Gold can’t be stopped in its tracks with a new daily high as it continues its advance above the psychologically important $1800USD per ounce level, pushing through some previous intrasession volatility to close at just below $1880USD per ounce. I still contend it has a lot of legs to continue up to the November 2020 highs at the $1960 level:

Glossary of Acronyms and Technical Analysis Terms:

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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

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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!