Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Last night saw markets listening to all the fancy words from Fed Chairman Powell in his semi-annual testimony as inflation concerns – aka taking the punchbowl away concerns – dominated events. Wall Street lifted while USD and bond yields fell back as Powell stated any tightening is still a way off, while European stocks continued to trend sideways. Gold was the standout, managing to lift up towards the $1830USD per ounce level. while Bitcoin’s deflation continued with a return to the $32K level yesterday enacting a small bounce. This rolled over overnight as the daily chart shows it ready to decline back to the start of year position at $30K or lower 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 closed 1% lower to finish at 3529 points while the Hang Seng Index also pulled back smartly, down 0.6% to 27787 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 also looked wobbly with the Nikkei 225 closing 0.3% lower at 28608 points. Daily futures are at best suggesting another sideways trend instead of a breakout 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 only ones to put on any runs as the Westpac consumer sentiment survey was very solid, the ASX200 closing 0.3% higher at 7354 points. SPI futures are down over 10 points despite the moves higher on Wall Street, as the lack of new daily highs continues to weigh heavily here (imagine a Monty Python naked foot on top of the chart). Daily momentum remains nominally positive and trailing daily ATR support at 7150 points is still holding however:

European markets were unable again to gain traction as UK inflation measures lifted more than expected and a higher Euro weighed on sentiment. While the FTSE lost 0.5%, the German DAX finished down a handful of  points, remaining above daily ATR support at the 15300 point level but going nowhere. The potential breakout trade still requires more of a follow through here and more correlation with other risk assets like Wall Street:

Wall Street this time did appreciate the inflation print comments from Fed Chair Powell, although earnings reports overshadowed, particularly tech stocks with the NASDAQ losing 0.2% while the S&P500 gained 0.2% to close at 4374 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 return 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 responded strongly again to US inflation concerns with USD selling off against most of the majors, although Pound Sterling had a reprieve due to its own inflation troubles, with Euro pushing up through the 1.18 handle taking back most of the post US inflation print falls. Standing back, the four hourly chart is kind of transmitting a possible bottom forming here but there’s still quite a bit of work to do above the 1.1850 level and then 1.19 proper before getting too excited – this could prove transitory too:

The USDJPY pair was hit hard overnight, retracing well below the 110 handle and making a new intrasession low for the week after rebuffing overhead trailing ATR resistance at the 110.50 level. Momentum is almost in the oversold stage signalling more downside so watch for continued overall weakness around USD and further disruptions due to COVID at the Olympics:

The Australian dollar was initially pushed higher on the Fed inflation comments but sort of got stuck just below steady resistance at the 75 handle, not making a new high where it sits this morning going into the Sydney open.  Momentum is back to the positive setting on the four hourly chart but nowhere near overbought as overhead ATR resistance at the 75 level becomes a bridge too far for the Pacific Peso:

Oil is still struggling to find direction here following last week’s OPEC+ meeting with Brent crude retracing overnight to get back below the $75USD per barrel level after what looked like an eminent breakout. What is required is another move higher to match or surpass the previous highs at the $77USD level but this is not yet eventuating as daily momentum tapers into neutral settings:

Gold is no longer holding on its breaking out on Powell’s inflation comments with a lovely run up overnight following nearly two weeks of steady buying support above the $1800USD per ounce level, finishing at almost $1830. The clearance of the high moving average and a new weekly high bodes well for the shiny metal going forward:

 

 

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. New Zealand housing: Prime Minister Jacinda Ardern’s crackpot socialism for property speculators only …

    … brace yourself for the graph below …

    Houston we have a problem … Kiwiblog

    https://www.kiwiblog.co.nz/2021/07/houston_we_have_a_problem.html

    … When does Jacinda Ardern’s Labour – led government intend to sort out land supply and infrastructure debt financing to SIMPLY ALLOW affordable new housing to be built ?
    .
    .
    The housing affordability crisis is likely worse than you think … Charlie Mitchell … Stuff New Zealand

    https://www.stuff.co.nz/life-style/home-property/300339165/the-housing-affordability-crisis-is-likely-worse-than-you-think

    Building consents issued: May 2021 … Statistics New Zealand

    https://www.stats.govt.nz/information-releases/building-consents-issued-may-2021

    Estimated number of new homes consented per 1,000 residents up in June year (note important historical graph) … June 2020 … Statistics New Zealand

    https://www.stats.govt.nz/news/estimated-number-of-new-homes-consented-per-1000-residents-up-in-june-year

    So far through 2021, the provisional residential consent rate per 1000 population per annum (a standard international industry measure) is about 8.5 (refer Stats NZ May report above) … but as the important historical graph (access Stats NZ June 2020 directly above) clearly illustrates, through the Kirk Labour government era of the 1970’s, it peaked at 13.2 / 1000 pop pa.

    With New Zealand’s population now about 5.1 million, a 13.2 consents per 1000 population per annum is about 67,320 new consents on an annual basis … up considerably from the current 8.5 / 1000 pop pa or approximately 43,350 units nationally at the current pace through 2021.

    Consents are constantly increasing overall … although the performance (or otherwise) of specific markets must be closely researched.

    Real estate is local.

    When Prime Minister Jacinda Ardern was authentic on housing issues prior to the 2017 election, she often spoke in glowing terms about the Kirk Labour government’s new housing production performance.

    Luckily through that era, like the USA and Australia we had a world – class residential production construction industry … that has sadly since that time, been bureaucratically bludgeoned back in to high cost / low performance stone age cottage industry.

    Fortunately for the USA and Australia, they still have their residential production sectors … examples … USA D J Horton – Americas Largest Homebuilder … Metricon Australia .

    New Zealand needs to restore its residential production construction industry … with urgency.

    New Zealand’s Generation Homes CEO Kevin Atkinson discussed these issues within a couple of Opinion pieces for Stuff and the NZ Herald back May 2018 ( Opinion: Let the builders build … Stuff NZ and Kevin Atkinson: New ways of financing are needed to boost house building … NZ Herald )

    Mr Atkinson made it very clear within these articles that he could double production (with obviously much lower pricing), with the same resources as and when land supply and infrastructure debt financing are sorted out.

    A couple of years ago the median price of a serviced section / lot in the United States was slightly below $US 50,000 … Lot Values Hit Record Highs (U.S 50,000 median price per serviced Lot) . Natalia Sineavskaia . U.S National Association of Home Builders .

    When can we expect to have this pricing for sections / lots restored in New Zealand ?

    When can we expect the politicians and planners at central and local level to belatedly sort out (hasn’t the talk gone on long enough ?) land supply and infrastructure debt financing, to allow a high performance / lower cost new housing production sector to be restored in New Zealand ? … refer Performance Urban Planning archival website for extensive further information.

    • Friday’s inflation figure next worry for rattled homeowners … Tom Pullar – Strecker … Stuff NZ

      https://www.stuff.co.nz/business/125759626/fridays-inflation-figure-next-worry-for-rattled-homeowners

      Inflation figures that will be released on Friday are the next worry for homeowners fretting about high mortgage rates.

      Forecast interest rate rises, which just two weeks ago were a distant prospect for next year, have been approaching with the speed of a freight train.

      ASB, ANZ, BNZ and Westpac all now predict the Official Cash Rate will rise to 0.5 per cent on August 18.

      That is after the Reserve Bank capitulated on Wednesday by less reservedly acknowledging the strength of the economy and reducing its monetary stimulus. … read more via hyperlink above …