Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Share markets were largely contained as the USD extended its gains against the majors following the latest US Federal Reserve meeting. Wall Street remains spooked but has some signs of life remaining with local stocks almost unphased as the Australian dollar skirts new weekly lows. Bond markets are flipping around as well with short dated Treasury yields gaining while 10 years lifted – are we seeing another inversion? Commodity prices snapped back the hardest however, with oil and copper dropping while gold was poleaxed again as the USD seismic shift echoes.

Bitcoin continues to fall back from its recent breakout at the $40K level with its mild dip extending down to the $37K level this morning and almost below last week’s prior resistance level. Momentum is now oversold and price is ready to break four hourly support here for a possible return to the previous weeks lows unless the HODLers get busy:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite finally stopped selling off, lifting 0.2% to 3522 points, while the Hang Seng Index was treading water until it accelerated into the afternoon, closing up 0.4% to 28558 points. Price action was showing a possible wider breakdown as support at the 28500 point area was taken out but yesterday’s session leaves the daily chart confused so watch for a potential follow through and more upside to finish out the week:

Japanese stocks continued their pullback with the Nikkei 225 closing 0.9% lower at 29018 points. Daily futures are suggesting this will be supported somewhat on the open although Yen did strengthen significantly against USD overnight. There is a lot of hesitation built in here at the 29000 point level so watch for a potential break below the low moving average:

Australian stocks struggled post the Fed meeting with the ASX200 closing only 0.3% higher at 7362 points. SPI futures are up nearly 40 points so combined with a much lower Australian dollar support continues to build here despite the volatility on Wall Street overnight. While the daily chart is still showing a lot of overbought momentum readings that has the potential to invert this has been quite resilient so far:

European markets were again quite mixed overnight, with peripheral bourses lifting slightly while the FTSE fell back sharply. The German DAX managed to eke out a scratch session to finish 0.1% higher but lifted in futures alongside Wall Street. The daily chart remains nominally positive, but I continue to be wary of momentum readings as price acceleration is anemic despite a much lower Euro. Watch the low moving average for signs of a breakdown:

Wall Street was again all over the place with the Dow falling sharply, the NASDAQ lifting nearly 1% while the broader S&P500 put in a scratch session to settle at 4221 points. Price action on the four hourly chart continues to show hesitation and resistance building at the 4230 point level with the proper break below trailing ATR support at the 4220 level not yet reversed. It remains to be seen if this will be followed through to more robust daily support:

Currency markets were again flummoxed, with the USD doubling down against Euro with another near one handle move down overnight as the union currency finished this morning right on the 1.19 level. While there is always the potential for a violent swing play here I doubt it will have much legs as this big shift continues, but in the short term momentum is extremely oversold:

The USDJPY pair retraced suddenly overnight and out of whack with the other majors, almost retracing all of its post FOMC move to be back just above the 110 handle and rejecting the former March highs. The longer term charts had  been suggesting such a return for quite sometime now but this catalyst may not be enough to get it going overdrive. As I said yesterday, this big move higher required a wait and see pause for a follow through and it ain’t here:

The Australian dollar continues to be hit hard and this time its all about commodity prices sending it lower with a push back to the low 75s as it makes a new low for the calendar year. This takes it below the March lows and completes a huge bearish head and shoulders pattern that will have more downside:

Oil prices have retraced sharply following the Fed meeting in stride with the previous minor pullback turning into a wider selloff, albeit contained as Brent crude finished just above the $73USD per barrel level overnight. I mentioned that price action was looking a little toppy on its way up to the 2018 high at $83 as momentum readings went into extreme overbought stage but this has not yet turned into a rout of any kind – but watch that low moving average carefully:

Gold was not just hit hard it was thrown to the dogs with another big move lower overnight as everyone escapes long positions in the shiny metal in the wake of the Fed meeting, falling to the $1773USD per ounce level. As I asked yesterday, how far will this fall now that the Fed has rate hikes in sight? $1700? $1500?

 

 

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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