Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Last night saw an unexpected turn in so-called transitory inflation with the US June print soaring higher while German inflation was characteristically on track as expected. The latter saw European stocks trend sideways while the former saw Wall Street fall back from its usual trend of new record highs. Treasury yields pushed higher not helped by weaker auction results while the USD lifted across the board against the majors although gold managed to hold on above the $1800USD per ounce level.

Bitcoin continues to deflate with a return to the $32K level overnight as the daily chart shows it ready to decline back to the start of year position as the daily downtrend line (upper black sloping line) still holds:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite put on a solid 0.5% lift to finish at 3566 points while the Hang Seng Index jumped out of the blocks, closing up 1.6% to 27963 points. The daily chart shows a possible volatile bottom forming here after breaking down below daily ATR support at the 28100 point level and momentum reverting from very oversold levels,  but the picture still remains uncertain until a positive close above the 28000 point level is done:

Japanese stocks put in firm gains after a big surge at the start of the week with the Nikkei 225 closing 0.5% higher to 28718 points. Daily futures are looking like retracing this all over again, so yet another sideways trend instead of a breakout is probably developing here as a new trend higher requires at a minimum a new daily high above the high moving average and then clearing substantial resistance at the 29000 point level that has held since May:

Australian stocks were the least interesting with a flat session, the ASX200 closing 1 point down but still remaining well above the 7300 point level to 7332 points. SPI futures are up a handful of points this morning but the lack of new daily highs is turning this sideways trend into something possibly more sinister, even if a lower Australian dollar is helping out. Daily momentum remains nominally positive and trailing daily ATR support at 7150 points is still holding however:

European markets were unable to gain traction in the wake of the German inflation print with scratch sessions the order of the day. The German DAX finished unchanged at 15789 points, continuing the bounce off daily ATR support at the 15300 point level. The potential breakout trade still requires more of a follow through here and more correlation with other risk assets like Wall Street:

Wall Street however didn’t appreciate the too-good its bad inflation print with mild falls across the board, the S&P500 taking back its previous gains to close 0.4% lower at 4369 points. The four hourly chart shows a market still wanting to go higher with momentum reverting from its overbought status and price still holding above trailing ATR support. There is a possibility of a reutrn to last week’s highs around the 4340 point level if more fallout eventuates from the inflation print, namely Fed hawks getting more vocal:

Currency markets responding swiftly to the US inflation report with Euro pushed to a new weekly low below the 1.18 handle after valiantly holding at the 1.1870 level at the start of the week. As I posited yesterday, while four hourly trailing ATR resistance levels were broken briefly the lack of a positive momentum breakout did not suggest more upside so short positioning continues:

The USDJPY pair is continuing its reweighting after last week’s Yen safe haven buying with this bounceback above the 110 handle extending overnight as the USD gets stronger again, beating overhead trailing ATR resistance at the 110.50 level. Momentum is not yet overbought but this may have legs here as the swing trade turns into something more interesting and sustainable (until the next US inflation print or COVID breakout at the Olympics):

The Australian dollar was pushed lower on the US inflation print, almost matching last week’s lows at the 74 handle proper but found a little life earlier this morning to finish at the 74.40 level going into the Sydney open.  Momentum is back to the negative setting as overhead ATR resistance at the 75 level becomes a bridge too far for the Pacific Peso:

Oil is trying to find more direction here following the OPEC+ meeting with Brent crude nearly filling in its previous retracement to get back above the $76USD per barrel level overnight. Another move higher to match or surpass the previous highs at the $77USD could see this little dip finished before it even started and get ready for more upside up to the previous $83 target:

Gold is holding on despite a less than steady start to the week and the vagaries of the US inflation print, still finding buying support at the $1800USD per ounce level to remain above overnight, finishing at the $1807 level. This continued uplift has cleared the rounding top pattern that was forming on the four hourly chart, but still requires a higher close above the high moving average or short term resistance will way against the shiny metal and send it back down to the $1790 ATR support level quickly:

 

 

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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