Macro Morning

See the latest Australian dollar analysis here:

Australian dollar rides the energy panic

It’s risk off as the latest CPI print in the US underwhelmed Wall Street, sending US stocks to a new one month low. Bond yields fell back sharply in response with the 10 year Treasury back to 1.26% while gold and other major currency pairs roundtripped around the print, with the shiny metal able to finally get back above the key $1800USD per ounce level. Commodities were mixed as iron ore reached a new ten month low, while copper and oil were largely unchanged.

Bitcoin surprised with a classic technical bounce off of its monthly support level at the $43K area, currently just below the $47K level this morning as it heads up to short term resistance:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite sold off sharply going into the close, down over 1.4% to be well below the 3700 point level,  while the Hang Seng Index continued its retracement, down 1.2% close at 25502 points.  The daily chart is showing price going rolling over yet again as it struggles to decisively clear its own high moving average nor trailing ATR resistance above the 26000 point level:

Japanese stocks were the only highlight in the region with the Nikkei 225 finishing 0.7% higher to 30670 points. The daily chart continues to show a very overextended rally with the 30000 point level not really turning into a resistance level but futures are indicating a pullback on the open in line with other risk markets. Long positions have held out here for more upside with price well above the high moving average, but I still contend a high risk/reward short trade opportunity is brewing here:

Australian stocks were able to just put in a positive finish to the session with the ASX200 eventually finishing only 0.15% higher at 7437 points. SPI futures are showing at least a 0.5% drop on the open, with ATR support that has been very solid at the 7360 point level possibly breaking for new weekly lows:

European markets were all over the place as the latest UK jobs figures combined with oscillating Euro shook things up across the continent with the German DAX barely putting in a positive scratch result to finish at 15722 points. The daily chart is still showing a bearish picture but notably ATR support at the 15500 point level is firming with momentum quickly inverting from the oversold pace in recent sessions. Another close above the high moving average at the 15800 point level is required but futures are indicating another rollover as Wall Street dumps:

Wall Street’s wobbles have turned into a proper dip with the S&P500 eventually finishing 0.6% lower at 4443 points, following the undershooting inflation print. The four hourly chart had been showing increased intrasession volatility with the usual BTFD crowd absent, as a wider correction phase growing here as momentum remains oversold:

Currency markets had more volatility obviously due to the US CPI print with a lot of oscillation and roundtripping around the event. Euro punched through the 1.18 level before completely claing it back to where it started with momentum still in the negative zone as the four hourly chart is still not providing much clue to future short term direction as overhead resistance remains strong:

The USDJPY pair reversed direction properly however, with a sharp selloff down to a new weekly low well below the 110 handle, after previously hitting overhead ATR resistance on the four hourly chart. The four hourly and daily charts are still range trading but the bears are currently keeping this down so look for a potential follow through below the 109.50 level:

The Australian dollar is slowly deflating now, having lost any means of remaining high due to dovishness at the RBA with even the US inflation print unable to stop the damage. My call for a potential breakdown below the 73.40 level has come in, now watch for further downside with that level becoming resistance:

Brent crude finished nearly 0.5% higher after a proper breakout sent it previously bursting through the $73USD per barrel level. Price action continues to broadcast a nice new trend even though momentum is not yet overbought, but this should progress into a rally up to at least the $75 level:

Gold finally found some buying support with a little breakout above the key $1800USD per ounce psychological level with previous abating intrasession volatility pointing to such a move, helped by the CPI print. The rejection of overhead resistance at the $1830 level in the medium term is still the big picture here so even a breakout above $1800 may not yet be enough to get things going:

 

 

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

  1. There’s a famous Chinese curse
    “May you live in interesting times”
    Well I think times are about to get very interesting.
    Evergrande is just one small piece of the puzzle, on its own it is insignificant, just another RE development overreach story, like we haven’t heard that story told a hundred times, in a hundred tongues.
    So what’s different this time?
    If you ask me, what’s different this time is China’s available choices.
    Over the last decade China has upped its global status from that of respectful manufacturing slave to that of independent master. The US is clearly unhappy that a former slave got uppity, but to suggest that that former slave is now an equal, well that’s a step to far for anyone, for anyone but China.
    So what does China do with their “Lehman brothers moment”?
    What does the US do if this devolves into China’s homegrown “GFC”?
    What choices does China really have?
    Or as the old curse goes may you live in interesting times

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