Macro Morning

See the latest Australian dollar analysis here:

Australian dollar pops and drops on Evergrande vs Fed

The lack of US traders overnight due to Labor Day holiday saw currency markets go into a holding pattern while European stocks put in multi year highs, with German factory orders much firmer than expected. The rolling pace of vaccinations combined with more solid economic news is buoying risk taking on the continent, with Brexit concerns contained to the rogue island state of Old Blighty. Commodity prices were mixed with oil slipping alongside gold while iron ore slumped nearly 9% which is sure to put a dampener on the Aussie dollar today.

Bitcoin gapped above the $50K level and then some following weekend trading but then stalled overnight with almost no change, finishing at just below the $52K level as of this morning. The daily chart had been showing a good setup here as price based around the $49K level, with support at $46K providing this springboard higher with the April $64K record high the next target level:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite had a great start to the week, 1.1% higher to burst back above the 3600 point level while the Hang Seng Index finished exactly 1% higher to get back its own 26000 point level which had been slowly turning into resistance.   The daily chart is really wanting to put in that bottom pattern, and while price recently cleared its own high moving average, with momentum now properly positive, trailing ATR resistance above the 26000 point level continues to weigh heavily on this market. But watch for a breakout here:

Japanese stocks continued their epic breakout, with the Nikkei 225 finishing another 1.8% higher to 29659 points. The daily chart shows price positively bursting with excitement, having cleared ATR trailing resistance above the 28000 point level and heading inexorably to the 30000 point level instead. With momentum clearly well overbought and overextended, watch for political catalysts which could see a violent retracement back towards the 29000 point level, or a big upside breakout – too volatile here!

Australian stocks were the odd ones out but at least they didn’t lose ground with the ASX200 closing dead flat at 7528 points. SPI futures are up nearly 0.2% so without the lead from Wall Street we are still likely to see some upside, although the big drop in iron ore prices yesterday may not help, neither will today’s RBA meeting in the afternoon. Price still needs to clear its own high moving average but the signs are looking good here with ATR support very solid at the 7360 point level:

European markets had a much better start to the week than expected with the Eurostoxx putting in a multi year high, helped along by the German DAX which closed nearly 1% higher at 15932 points. The daily chart has been showing a lot of hesitation and continued failures to make any new daily highs or clearing of the high moving average since early August, as resistance firms at the 16000 point level. Its still hard to be bullish here, but watch for a possible breakout as US traders return tonight and provide an upside catalyst:

Wall Street was closed due to the Labor Day holiday, with S&P500 futures suggesting a robust return this evening. The four hourly chart continues to show an upward flag pattern with a tight range with momentum now firming again to overbought levels as rising support helps swirl this market ever upward:

Currency markets also seemingly had the night off with almost zero volatility evident following the Asian session with Euro unchanged in a very tight range as it consolidates following an attempt at breaking through the 1.19 handle. Momentum remains positive but no longer overbought here so watch for any retracement back towards trailing ATR support on the four hourly chart as intrasession resistance is building just below the 1.19 target level:

The USDJPY pair was also relatively quiet, interesting given the political turmoil in Japan with consolidation at the 109.80 level after a mild gap higher first thing yesterday.  Watch for the 109.50 level at recent weekly support to possibly come under pressure next as four hourly momentum remains negative:

The Australian dollar also went to bed and did nothing, remaining at its Friday session lows just above the 74.30 level. Momentum readings on the four hourly chart have retraced from their overbought levels with resistance obviously building at the 74.70 level as this move went extremely over-extended. Iron ore and weak USD remain the dual catalysts but how long can it last before another pullback:

Oil prices also went nearly nowhere with Brent crude eventually pulling back to the $72USD per barrel level for a tepid start to the trading week. This puts it right on previous trailing ATR resistance level on the daily chart but not yet above the previous daily highs in late July/early August, so watch for daily momentum that has to build from here to have another go at the $75 level ahead:

Gold remains in an obvious holding pattern ready to breakout to new monthly highs above the mid July $1830 highs as it too had a very calm session overnight. Watch for that resistance level if its set aside as the short moves from early August will pile in and send it straight back to $1900:



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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