Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The hawks are squawking as stock markets fell across the risk complex on Friday night with continued fallout from the recent US Federal Reserve meeting. Wall Street tumbled, led by the Dow which was down for the fifth session in a row, while bond markets saw more yields rising on the short end of the curve. Commodity prices saw mainly precious metals take a dive as oil markets moderated, with currencies on a one way road as the USD seismic shift continues to gain against everything.

Bitcoin continued its rollover after failing all week to extend above the $40K level as it turned its mild dip into a wider correction, finishing at the $35K level over the weekend. The daily chart puts this move into perpective with daily momentum never getting into the positive zone and overhead resistance never cleared so expect more downside this week and a possible return to the former lows:

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite stalled yet again, finishing just a handful of points lower at 3524 points, while the Hang Seng Index zoomed higher, up 0.8% to close at 28801 points.  Price action was showing a possible wider breakdown as support at the 28500 point area was taken out but the previous session the daily chart confused. Given the wider risk off move across other stocks and the moving average band still pointing down for several weeks now, watch for more downside:

Japanese stocks have continued their pullback with the Nikkei 225 closing 0.2% lower at 28964 points. Daily futures are suggesting a big reversal alongside Wall Street on the reopen as this trading week starts. As I mentioned all of last week, there was a lot of hesitation built in at the 29000 point level so there is now potential for a return to the May lows at 27000 points:

Australian stocks had a tepid finish to the end of the trading week with the ASX200 closing only 0.2% higher at 7368 points. Its’s going to be a bad start however with SPI futures  down over 110 points or 1.5% as the risk off virus spreads to Asia, even with a much lower Australian dollar.  Momentum readings are inverting with a clear break of the low moving average suggesting that trailing ATR support at 7150 points or so is at risk next:

European markets finally broke on Friday night, unable to maintain the pretty week momentum and mixed moves throughout the week. The German DAX this time fell sharply, losing 1.8% to finish at a new monthly low at 15448 points. The daily chart was nominally positive leading up to this reversal, but I had been warning of anemic momentum readings even as the Euro made new lows that should have been more supportive. Daily ATR support is not that far away, neither is 15000 points proper:

Wall Street was gut punched by the hawkish Bullards follow up comments from the FOMC meeting with the punchbowl well and truly emptied on Friday night. The Dow lead the way, falling some 1.6% while the NASDAQ retreated nearly 1% while the broader S&P500 lost 1.3% to finish at 4166 points and a new monthly low. Price action on the daily chart is clear now following a lot of hesitation and resistance that had been building at the 4230 point level. There is not much daily support to be had here until the 4070 point level, which must hold or this will turn into a very wide correction that the Fed probably didn’t desire:

Currency markets remain a one way King Dollar parade with the USD doubling down against Euro with another large drop on Friday night, almost taking back the entirety of the March rally from the 1.17 lows.  All timeframes indicate massive oversold moves but this is irrelevant when currency makes a drastic shift in sentiment, so this could continue down to the 1.17 handle easily:

The retracement in the USDJPY pair on Yen safe haven buying has abated somewhat with some steadying action just above the 110 handle on Friday night. This followed a rejection of the former March highs, whose return had been suggested by the longer term charts but despite the USD moving against everything else, the wider risk off mood is supplanting its rise here:

The Australian dollar lost nearly 300 pips in one trading week, dropping from just above the 77 handle to the low 74s on Friday night, hit hard by the risk off virus and then hit again as commodity prices took a dive. This keeps it well below the March lows and completes a huge bearish head and shoulders pattern that will have more downside:

Oil prices had retraced sharply following the Fed meeting but were quite contained on Friday night with Brent crude finishing just above the $73USD per barrel level. Notably, price remains supported at the low daily average level just above $72, with this sort of retracement to be expected as price action was looking a little toppy on its way up to the 2018 high at $83. Momentum readings had gone 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 the worst hit last week as the inflationary hedge failed miserably, falling over $150USD per ounce to finish at the $1764 level on Friday night. As I asked last week, how far will this fall now that the Fed has rate hikes in sight? At a glance, the April lows at $1670 are not far away:

 

 

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. A Sneaky Scott holiday

    https://www.theage.com.au/world/europe/scott-morrison-s-secret-g7-side-trip-to-explore-his-family-history-20210620-p582no.html

    Scott Morrison’s office spent weeks planning a G7 side trip to explore his convict family roots while the Prime Minister publicly argued Britain was too risky for Australian travellers.

    Last Sunday’s pilgrimage to St Keverne, a small village 45 minutes south of the G7 summit site in Cornwall, was never disclosed to the media despite being on the schedule for at least a fortnight.

    Stranded Australians have seized on the non-official travel as evidence politicians are not subject to the same pandemic rules as others, while government officials have downplayed the extent of the Prime Minister’s activities.

  2. FMD, the Beetrooter is the Deputy PM again.

    I don’t think the sexual misconduct allegations against him were ever resolved were they. Probably doesn’t matter for the 2021 Coalition.