Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Nobody can stop the music as Wall Street surged once more on Friday night to a new record high with the latest corporate earnings a strong tailwind.  While stocks rose everywhere, currencies and bond markets were largely unchanged with commodities also mixed as oil and copper rose slightly while gold and iron ore fell back.  The good news should continue here locally in Asia with stock futures pointing to very solid opens across the region with Japanese markets reopening following the start of the Olympics in Tokyo.

Bitcoin had put on a very subdued rally since midweek but it has failed to extend this into anything tangible, closing out last week well below the $33K level. As I said last week, I still contend this is another dead cat bounce amid the ongoing downtrend, as a sustained move higher requires a daily close above $33K and then a clearance of trailing ATR resistance at $35K or more:

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite finished 0.6% lower at 3550 points while the Hang Seng Index finally found a bottom doing the best in the region to close 1.4% lower at 27321 points. I mentioned last week that the daily chart showed price action possibly putting in a double bottom pattern with long tails of buying support building, but a failure to finish that swing signal with any price action above the high moving average has now translated into what could be capitulation. I’m looking for a further close below the recent lows at 27000 points:

Japanese stocks were closed for a holiday on Thursday and Friday with Nikkei 225 daily futures suggesting a further advance likely on the return on Monday. While I’m still worried about possible volatility around further outbreaks of COVID at the Olympics this short lived short covering rally could turn into something wider, so watch daily momentum to possibly switch positive here as the first sign:

Australian stocks edged only slightly higher with the ASX200 lifting 0.1% to finish the week on a fairly robust note, but SPI futures are suggesting an even big surge on the open of the trading week. Momentum has moved higher into the overbought zone with new weekly and daily highs being made, so apart from the ratlicking on display over the weekend, more optimism during lockdown is keeping local stocks afloat:

European markets were able to follow through on their bounce with the German DAX lifting exactly 1% higher to finish at 15669 points, capping off a week of high volatility only really favouring short term traders. Price action has been pushed well above previous daily ATR support at the 15300 point level with momentum now back to the positive zone with this swing trade target fulfilled above the 15600 point level. The next stage is again another attempt at breaking through the previous weekly highs that are forming staunch resistance at the 15800 point level – can Wall Street provide this catalyst?

Wall Street threw caution to the wind with a big surge across all three markets, with tech stocks leading the way as the NASDAQ and S&P500 both lifting over 1% to complete the dip filling and then some – the latter making a new record high. The four hourly chart shows this bounce now getting into the overbought mode on the back of earnings with the previous highs at the 4380 level setting a very good short term uncle point for those who want to bet this will continue into ever more record highs – 5000 points anyone?

Currency markets saw a reduction in volatility with the slew of transatlantic PMI surveys not really rocking the boat with increased risk taking on stock markets also proving no catalyst for further moves on most risk currencies. The Euro finished the week on a dour note, remaining depressed here below the 1.18 handle and making a new weekly low in the process. The idea of a potential short term bottom forming here at the 1.1760 level seems to be squashed again as price remains unable to firmly get above the downtrend line since the previous weekly high:

The USDJPY pair was able to breakout however despite the absence of traders and shot above the key 110 level as momentum became overbought on the four hourly reading as it finished a touch below the recent weekly high at the 110.50 level. This sets up for a solid start to the trading week on Monday where the 110 handle should provide solid support in the short term:

The Australian dollar was largely unchanged but fell back slightly towards the end of the session as it proves unable to translate its recent swing move into further upside here as the trailing ATR resistance at the 74 handle proper provides too strong a headwind. I’m watching for a potential pullback towards the 73 level here soon:

Oil put in a tepid finish to a volatile week with Brent crude remaining relatively stable above the $73USD per barrel level as internal buying support keeps it above the previous daily ATR support level. There needs to be a substantive second close above the high moving average at $73 with a solid switch to positive momentum before calling this dip over:

Gold was just able to cling onto the $1800USD per ounce level on Friday night after it deflated all week after the previous failed breakout above that zone. Daily momentum is barely nominally  positive, with a lack of buying support turning this stabilisation into a possible leg down alongside other undollars:

 

 

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

    • One, two, a one, two, three, four

      Off the road again
      Just can’t wait to get off the road again

  1. Bitcoin had put on a very subdued rally since midweek but it has failed to extend this into anything tangible, closing out last week well below the $33K level. As I said last week, I still contend this is another dead cat bounce amid the ongoing downtrend, as a sustained move higher requires a daily close above $33K and then a clearance of trailing ATR resistance at $35K or more:

    BTC booms!
    https://www.forbes.com/sites/billybambrough/2021/07/24/crypto-price-surge-surprise-tech-giant-support-suddenly-sends-bitcoin-ethereum-bnb-xrp-and-dogecoin-sharply-higher/