Macro Morning

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Its that time of the month again with the latest jobs figures from the US – aka non-farm payrolls or NFP – setting the risk taking tone for the rest of the risk complex until the next print in early September. The result was a lot better than expected, sending USD and Treasury bond yields a lot higher and pushing risk currencies like the Australian dollar, Euro and gold to the floor, while keeping Wall Street somewhat elevated. Tech stocks on the NASDAQ took a small hit but the S&P500 managed a new record high, again. Commodity markets were relatively unchanged with oil prices still under pressure but it was gold that was flummoxed to a new two month low.

Bitcoin kept the crypto dream alive, remaining well above the $40K level and now gapping fast above the $44K level as we start the new trading week as that bottom pattern seems fulfilled. Can it now get back to the previous highs near $60K? Of course! It makes complete sense! Whoosh!

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite once again looked very weak, finishing 0.3% lower to 3458 points while the Hang Seng Index put in a scratch session to finish 0.1% lower at 26179 points. The daily chart remains poised here as a potential bottom is looking weaker each session, with the inability to break above the high moving average the telling signal that its not wise to get long here just yet, requiring a substantial breakout above the 26700 point level at the minimum:

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Meanwhile Japanese stocks continued their rebound on a weaker Yen, with the Nikkei 225 pushing some 0.3% higher to 27820 points. Futures are suggesting a relatively lacklustre post-Olympics start to the trading week with a breakout still possible here above the descending triangle pattern which continues to offer clear enter/exit positions on the next move:

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Australian stocks were looking to put in another scratch session but ramped up at the close with the ASX200 finishing 0.3% higher at 7538 points. SPI futures are up nearly 0.4% as exuberance returns despite more than half the eastern economies still in lockdown, with daily momentum pushing into extremely overbought readings as the daily chart looks very good in the medium term:

European markets were relatively steady pre and post NFP with the German DAX only putting on 0.1% to close at 157614 points as price action continues to build well above previous daily ATR support at the 15300 point level. Momentum has properly swung into the overbought mode which suggests more upside and a potential break of the previous weekly highs but we’ve been here before so it could come unstuck, even with a very weak Euro:

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Wall Street had a measured response to the NFP with the headline Dow gaining more than 0.4% while the NASDAQ took the same back as the S&P500 cruised in with yet another new record high albeit only closing 0.2% higher at 4436 points. The daily chart is showing a nominal pace that should still be supported with daily momentum nicely overbought and previous short term resistance at the 4420 point level cleared so this should keep going until the next BTFD:

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Currency markets however had a different response to the NFP with the stronger print resulting in a stronger USD which parlayed into all undollars getting crunched underfoot. The Euro was already looking weak going into the print, hovering above the trailing ATR support line at the 1.1830 level after deflating most of the week and then quickly brokedown to the mid 1.17’s to match the previous weekly low. Whether this creates further lows is dependent on further USD strength and machinations this trading week, watch for a short term mean reversion swing that may result in more sellers stepping in:

The USDJPY pair extended its gains following the previous wobble as it pushed through the 110 handle for a new weekly high, almost filling the gap from the last two weeks of price action. Four hourly momentum is getting into extreme overbought mode so we could see a small reversion on the open this week but price seems well supported now at the 109.80 level at least:

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The Australian dollar was pushed lower, but not as much as feared, heading towards the previous weekly lows at just above the mid 73 level due to the jobs print. As I’ve been saying for awhile the medium term price pattern is still bearish with the inability to break through the 74 cent resistance level and this print may solidify this move going forward:

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Oil prices just can’t get out of their slump despite the good economic news and are vainly trying to return to the mid July lows as Brent fell back 1% on Friday night, finishing just above the $70USD per barrel level. The retest of the previous lows at the $68 level is still in play here as momentum gets well oversold but watch for any action above the low moving average:

Gold’s deflation during the week as it tried to keep above the $1800USD per ounce level was in all vain as the NFP print saw it lose over $40USD per ounce and taken straight back to the June lows in one fell swoop. This could see the next month of trading push it even lower as the medium term position is solidified as bad bad bad for goldbugs:

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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

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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)

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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!