Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A risk off situation was brewing across stock markets at the end of last trading week but a rally on Wall Street, seemingly without catalyst as seen confidence return across the board. Treasury yields pushed slightly higher but still remain near their yearly lows while the USD pulled back against everything except Yen as safe haven buying abated. Oil prices spiked up 2% again while gold made another new daily high above the former $1800USD per ounce level. This should give beleaguered Asian shares a small boost to start this trading week but regional COVID concerns are likely to still weigh.

Bitcoin is still wandering around listless, having been pushed back down to the $32K level through most of last week with the daily chart still looking very uneventful but definitely with a bearish bias so watch the recent daily lows for signs of a breakdown:

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite finished flat with a scratch session at 3524 points while the Hang Seng Index was able to bounce back relatively slightly, up 0.7% after previous breaking down completely, closing the week out at 27344 points. The daily chart shows a possible volatile bottom forming here but after breaking down below daily ATR support at the 28100 point level and indeed the May lows and with momentum still considerably oversold, do not rely on one candle to suggest that bottom is in:

Japanese stocks were still in selloff mode as COVID hits the Olympics, with the Nikkei 225 closing 0.7% lower at 27940 points. Daily futures are looking a lot better however, given the selloff on Yen on Friday night with a bullish engulfing candle suggesting a return to well above the 28000 point level on the open this week. However, as I said above, don’t rely on a single candle – but this looks a lot better, having not broken below the May lows and with momentum reverting. I’d want to see a close above the high moving average before getting excited however:

Australian stocks finally saw their own selloff widen with the ASX200 closing 1% lower to retrace back below the 7300 point level, closing the week at 7273 points. SPI futures however are looking to fill in that and more on the open, up over 1% so far so we’re likely to see stabilisation again of this sideways trend that has held since early June, with daily momentum still nominally positive and trailing daily ATR support at 7150 points still holding:

European markets remain highly volatile with yet another bounce, with more deliberation over the ECB’s latest minutes causing a change of risk taking heart across the continent. The German DAX spiked over 1.7% to close at 15687 points, bouncing off daily ATR support at the 15300 point level. This sets up for another potential breakout, but again stability has not been a hallmark of this sideways march so expect the unexpected:

Wall Street regained its mojo with a co-ordinated BTFD bounceback, with both the NASDAQ and the S&P500 closing 1% higher, the latter at 4369 points to another new record high. The daily chart shows a market still fully engaged and ready to go higher with momentum remaining well into an overbought status and price holding well above trailing ATR support. This looks like just another wobble with all eyes on short term support at the 4300 point level to use as an uncle point going forward:

Currency markets are seeing a return of USD weakness in a reversal that started late last week in the wake of the ECB inflation re-targeting with Euro again spiking on Friday night to make a new weekly high well above the 1.18 handle. This is slowly turning into a reweighting as price has been able to break the steady steps down in the trailing ATR resistance line with momentum now overbought on the four hourly and daily charts, with a possible upside target at the 1.1970 level:

The USDJPY pair is also seeing a slight reweighting after a week of huge Yen safe haven buying in the wake of the COVID crisis around the Tokyo Olympics. By bouncing back above the 110 handle on Friday night, this only creates a long swing position so far with momentum still nominally negative and price well below trailing ATR resistance overhead at the 110.50 level:

The Australian dollar came back similarly, but also has a similar swing only buy pattern with price unable to break back above the 75 handle although it has filled in most of the mid week losses.  Momentum is back to the neutral setting but overhead ATR resistance at the 75 level is the key area to watch this week to see if the Pacific Peso can get out of its funk:

Oil is finding more support following the OPEC+ meeting with Brent crude lifting nearly 2% on Friday night to close back above the $75USD per barrel level. While price remains strongly supported in this uptrend, the move down to trailing ATR support at $72 may not yet be over, with volatility to rule here still. Watch for a new daily high above the high moving average as a clearer buy signal:

Gold is having more and more luck now, finding more buying support at the $1800USD per ounce level with another clear close above that level on Friday night for a new weekly high. I’ve been stating that to keep this moving requires another big move above the high moving average and we’ve had that but former ATR support at the $1840 level is the real medium term resistance to watch here and would require a lot more USD weakness:

 

 

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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