Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Risk markets played the taper game last night with the latest US private jobs data report sweeping aside any notions that the Fed will hold off on tapering their bond buying program, with the latest ISM service survey also showing a huge rebound in the US economy. The USD surged as a result against all the major currencies, whopping gold below the $1900USD per ounce level and causing stock markets to wobble with Wall Street losing around 1% as the punchbowl starts to empty out. Commodity prices fell as a result, although oil remained firm while copper lost nearly 3% and gold nearly 2%.

Bitcoin finally made some headway yesterday but has stalled out at key overhead resistance at the $39K level, failing to breakout above the four hourly ATR level on the four hourly chart as momentum subsides – look out below:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was looking to put on gains but pulled back in afternoon trade to finish 0.4% lower at 3584 points while the Hang Seng Index had a proper pullback, losing more than 1% to close at 28966 points.   This price action is not promising at all after showing a clear bullish engulfing candle that seemingly confirmed a new trend was underway, but the inability to decisively clear resistance at the 29000 point level with the high moving average support level thwarted shows it could get wobbly ahead:

Japanese stocks tried to move forward with the Nikkei 225 lifting another 0.4% to close at 29058 points. Daily futures are looking to stall out yet again though as there is still considerable resistance at the trailing ATR daily and psychological 29000 point level to clear here, with session highs at the 29300 point level the real area to watch. Watch for the low moving average to come under pressure here going into today’s session with the general risk off mood:

The ASX200 continued to outperform with the latest trade and retail figures, lifting nearly 0.6% to close at 7260 points. SPI futures are flat however so we could a mild pullback here on overall risk aversion but this is a much better market that is piling in due to the lower Aussie dollar overnight:

European markets stumbled across the continent in the wake of the US jobs data with only the German DAX putting on any gains, lifting 0.2% higher to 15632 points. There is a lot of reluctance to buy here given the upcoming Fed taper so while prices are still on trend and momentum remains slightly overbought, its not that exciting to be long here:

Wall Street hated the good news and fell sharply across the board, with tech stocks losing the most naturally – the NASDAQ down over 1% – while the S&P500 lost nearly 0.4% to finish at 4192 points. Price action on the four hourly chart is still showing an inability to decisively clear that 4200 level with momentum flipping back to negative readings. Watch the 4170 support level – which corresponds to the lower megaphone range to come under pressure tonight during the NFP print, which could really surprise:

Currency markets were the most affected by the ADP print with USD re-surging to its King Dollar position, with no-one escaping the damage. Euro slid nearly a full handle, dropping straight through the 1.22 level and then making a new weekly low, wiping out all positive sentiment to be at the 1.2120 level this morning. There could be a wider selloff tonight if the NFP print firms alongside:

The USDJPY pair finally stuck its breakout overnight, with a lift up through the 110 handle that looks like sticking for now. Momentum is nicely overbought and ready to push higher as this makes a new weekly high, so watch for more upside and for the 110 handle itself to turn into support:

The Australian dollar was walloped of course, suffering a similar fate to Euro overnight with a fall straight through the 77 handle and then some, breaching all the major support levels along the way. This time commodity prices aren’t helping at all and while momentum is now extremely oversold we could see more downside with the 75.80 monthly support level next in line:

Oil is poised here – benefiting from the obvious uptick in the US economy – but dragged down by the higher USD with only a scratch result overnight for Brent crude, remaining slightly above the $71USD per barrel level. There is still the potential run up to the 2018 high at $83 or so but I’m cautious here despite some good momentum:

Gold had been slowing down after trying to extend above the $1900USD per ounce level but was finally put in its place overnight by the much stronger USD with a 2% plus selloff taking it back to the $1870 level. While the  upside next level at the $1960 level remains in sight, there is a potential for a wider correction here to trailing ATR support at the $1850 level in the short term:



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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