Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Sentiment was mixed all of last trading week and it culminated in a co-ordinated selloff on Wall Street to end the trading week on a bad note. It was all about inflation – expectations that is – with the US running a little scared the so-called “transitory” inflation may turn out hotter than expected. Bond markets moved the show more than anything else with Treasury yields dropping quickly to their former monthly lows while the USD firmed against everything. Expect a rocky start to the trading week here in Asia.

Bitcoin’s deflation continued with a return to just above the start of year position at $30K or lower as the daily downtrend line (upper black sloping line) still holds as the HODL’ers get quite nervous:

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite closed 0.7% lower at 3539 points while the Hang Seng Index eked out a small gain, lifting 0.2% to remain above the 28000 point level. The daily chart was suggesting a possible bottom forming here after breaking down below daily ATR support at the 28100 point level but price action is definitely not supportive of further buying with a lot of intrasession selling pushing exuberance back to reversion below the 28000 point level even as momentum reverts from very oversold levels, so this price picture still remains uncertain:

Japanese stocks however continued to sell off sharply with the Nikkei 225 closing 1% lower at 28003 points. Daily futures are now suggesting further retracement as concerns around COVID at the Olympics and the wider US led risk off mood combines to evaporate confidence, let alone the higher Yen. Watch for a close below the previous daily lows at the 27000 point level to signal a new downtrend:

Australian stocks also put in some tiny gains to finish the week on a good note, lockdowns notwithstanding, with the ASX200 closing 0.2% higher at 7348 points. SPI futures are down 40 points or over 0.5% so we could finally see a break of this sideways mood that has held seemingly all of June. Daily momentum remains nominally positive and trailing daily ATR support at 7150 points is still holding but for how long:

European markets remained in selloff mode despite a lower Pound and Euro as sentiment continued to sour ending the trading week on a poor note, although the FTSE put in a scratch session. The German DAX fell back 0.5% to 15540 points, remaining above daily ATR support at the 15300 point level but falling below the once rising moving average band and setting up the chance of a potential breakdown below 15300:

Wall Street accelerated the risk off mood with co-ordinated selloffs, with the headline Dow, NASDAQ and S&P500 all finishing some 0.8% lower, the latter closing the week at 4327 points. The daily chart shows a clean break of the uptrend that held since the last dip mid-June with the rebuff of last week’s highs signalling a possible retracement further to the previous dip lows at the key 4300 point level:

Currency markets generally moved in the same downward direction as US strength re-engaged with Pound Sterling falling back to a near monthly low while Euro slipped back to the 1.18 handle once again. There maybe a short term bottom forming here but price has been unable to get anywhere near the weekly high at just below the 1.19 level for quite sometime now with momentum remaining in the negative zone:

The USDJPY pair was pushed back below the 110 handle despite the inflation data as more Yen safe haven buying on the risk off mood overshadowed the USD strength. This almost took it back to the intrasession low for the week after previously rebuffing overhead trailing ATR resistance at the 110.50 level. Momentum is somewhat neutral in the short term and at best we’re likely to see a continuation here sideways:

The Australian dollar was pushed lower once more on USD strength with a return to last weeks low just above the 74 handle after failing to make a new high in the previous session and indeed all week. The weekly chart here is very illustrative with price breaking below key ATR weekly support at the 74 level and taking out all of 2021’s gains and indeed back to late 2020 level. This could turn into a rout if US inflation expectations pick up further and shock horror the RBA has to consider raising rates a lot sooner:

Oil continues to struggle following the OPEC+ meeting with Brent crude pulling back to a new weekly low just above the $73USD per barrel level Friday night after a failed breakout earlier in the week. Price and momentum are pointing to a return to trailing ATR daily support at the $71 level very soon here, which could open up a wider correction:

Gold’s breakout hit the brakes on Friday night despite the inflation outlook and while it didn’t breach the $1800USD per ounce level nor the low moving average on the daily chart, this pullback from a new weekly high does not bode well for future gains. Short term support at the $1820 level has been taken out and momentum remains negative on the daily chart so that equates to a probable end to this melt up rally:

 

 

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!

Latest posts by Chris Becker (see all)