Macro Morning

See the latest Australian dollar analysis here:

Australian dollar rides the energy panic

Corporate earnings were supposed to give Wall Street a lift on Friday night but some cautious revenue estimates from big tech saw a continuation of the risk off mood that has been gripping Asia most of the week due to the Chinese tech stock selloff. Currency markets were little changed after the mid week reversal in USD after the Fed meeting, while Treasury yields fell back slightly across the curve. Commodities mainly retreated in line with other risk assets, although Brent crude managed to put in a small lift, but all eyes are on iron ore which slumped 7% on Friday on Chinese stell production cuts.

Bitcoin is still holding on to its breakout gains pushing through resistance at the $40K level on Friday night and holding over the weekend. The daily chart shows a move above a tight symmetrical pattern with trailing ATR support and the low moving average at $36K remaining heavily supported here, we could see a new rally emerge here to take the beleagured crypto back to its record highs:

Looking at share markets in Asia from Friday’s session, where Chinese markets continued their drubbing following the recent self induced regulatory foot shooting with the Shanghai Composite down 0.4% to just under 3400 points while the Hang Seng Index was off by nearly 1.4%, finishing at 25961 points. The daily chart was showing a potential bullish engulfing candle but that proved to be just a dead cat bounce with two daily rollovers pointing to a possible return to the 25000 point level when the trading week restarts:

Japanese stocks got caught up in the risk off mood, with the Nikkei 225 closing nearly 1.8% lower at 27283 points.  Futures are down again with the overall daily chart remaining in a bearish mood and with COVID breakouts accelerating at Tokyo, the good news is hard to find here unless price breaks well above the key 28000 point level at the high moving average:

Australian stocks got the jitters with the ASX200 pulling back 0.3% to finish the week at just below the 7400 points level. SPI futures however are up 30 points or so, despite the new lockdowns in SEQ and continued COVID breakouts in NSW putting a big dampener on economic growth as the lower Aussie dollar helps with risk spirits. Daily momentum is still slightly overbought and the daily chart still looks bullish here in the medium term:

European markets basically saw some end month selling to finish the week (and err month) on a very flat note, not helped by the recent higher than expected German CPI print and subsequent higher Euro. The German DAX finished 0.6% lower at 15540 points and while price action remains above previous daily ATR support at the 15300 point level momentum is still at a neutral/negative setting as price action remains listless. Attempts at breaking through to get back to the previous weekly highs at the 15800 point level are going nowhere so there is the growing potential for a breakdown:

Wall Street was pushed lower mainly by tech stocks with the NASDAQ falling 0.7% although still highly elevated while the S&P500 finished 0.5% lower to retreat just below the  4400 point level. The daily chart remains heavily biased to the bullish side so this was not a major one day event to be concerned about just yet as daily momentum remains nicely overbought and price remains above the recent lows and above trailing ATR support:

Currency markets were still relatively volatile after the mid week weakness in USD was pulled back somewhat on the majors with Euro dragged back below the 1.19 handle after an exuberant surge. The four hourly chart was clearly showing momentum as extremely overbought with price action pointing to a rollover and here we are, the question is will it pause here or continue to fall below the 1.1850 level later tonight:

The USDJPY pair was less sanguine, remaining fairly depressed here at the 109.70 level after almost matching the recent weekly low during its deflationary bout through the previous trading week. The four hourly chart continues to look like the bearish Nikkei 225 and that means more potential upside for Yen as safe haven buying increases, watch particularly the 109.40 level for signs of capitulation:

The Australian dollar was unable to clear its stuck mood here with the push above trailing ATR resistance at the 74 level thwarted completely on Friday night, sending it back down to the low 73s and almost making a new weekly low in the process. The overall price pattern is morphing into a bearish continuation with momentum now oversold and ready to go lower towards the 73 handle proper:

Oil prices were largely unchanged with Brent crude lifting only 0.4% to finish the week just above the $75USD per barrel level. Internal buying support is still keeping it above the previous daily ATR support level and momentum is now moving towards the overbought stages after being neutral most of last week, but the daily price changes are still a little anemic to call this a proper rally:

Gold  found some life in Thursday session, matching the previous daily high set a few week backs but was thwarted on Friday night with a retracement that still kept the shiny metal above the precious $1800USD per ounce level. Daily momentum remains nominally positive so there is potential for another crack higher but overall this market remains in a bear phase until the $1850 level can be breached:



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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