Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Wall Street volatility spiked significantly overnight in the wake of the latest strong retail sales data with the USD firming strongly against many of the risk currencies as a result, particularly the Aussie dollar which continues to fall in line with iron ore. Bond yields lifted across the curve while other commodities inched higher, although gold was flummoxed, falling more than 2% for a new monthly low.

Bitcoin was unable to keep pushing higher after its classic technical bounce off the monthly support level at the $43K area, rejecting the $48K level overnight as short term momentum retraces from its nicely overbought position. Watch for a potential return to the start of week position at the $46K level:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite fell sharply after gapping higher at the start of the session, falling 1.3% to close just above the 3600 points level while the Hang Seng Index continued its very sharp retracement, falling 1.5% lower to finish well below the 25000 point level at 24667 points. The daily chart continues to show price rolling over sharply as it matches the previous lows in late July and August, with the 25000 point level the key area to watch as the Evergrande catalyst rolls on:

Japanese stocks also pulled back for the second consecutive session with the Nikkei 225 down 0.6% to 30323 points, not helped by a much stronger Yen. The daily chart continues to show a very overextended rally with the 30000 point level turning into a probable resistance level, with futures indicating a small pullback on the open, despite Yen selling off overnight. Long positions have held out here for more upside with price well above the high moving average, but deceleration is quite obvious now:

Australian stocks were the only market to not experience any falls yesterday, with the ASX200 actually lifting 0.6% to 7460 points. SPI futures are down about 20 points due to the volatility on Wall Street overnight but we should see daily support hold here to keep the market above the 7400 point level:

European markets all finished in the green before the volatility hit Wall Street with the German DAX finishing 0.3% higher at 15651 points. The daily chart is still showing a bearish picture and although ATR support at the 15500 point level is still holding, price action remains contained under the flat lining high moving average at the 15800 point level with short and medium term momentum also still in the negative zone. Nothing to get excited about here:

Wall Street had a fairly wild ride overnight with the NASDAQ the only market to finish up, but barely, while the S&P500 eventually closed only 0.2% lower after being down more than 1% as volatility increased. The four hourly chart shows price bounced up to the 4480 point level but was thwarted as sellers pushed it  back to the intraweek low at the 4430 level instead before another violent bounceback has seen these levels turn into classic support and resistance going forward. Momentum remains negative here in the short term:

Currency markets picked up in volatility as well with the US retail sales and initial jobless claims keeping things interesting overnight. The Euro broke decisively through the 1.18 level to the mid 1.17’s for a new weekly low with previous price action showing a lot of tired support fading here. Momentum is considerably oversold now so we could see a mild lift higher towards the 1.1780 level tonight on the EZ wide core inflation print:

The USDJPY pair did the exact opposite with correlations working out this time, pushed straight towards but not through the 110 handle or overhead ATR resistance at the 109.80 level in a breakout that may not persist. Short term momentum is still nominally negative so watch for a possible pullback here as we end the trading week:

The Australian dollar continues its iron ore led deflation to push it below the 73 handle proper after failing to go anywhere on yesterdays’ unemployment print. It’s clear that strong resistance was forming at the 73.40 level and this could lower again as overhead ATR resistance shows the step downs back to previous weekly support:

Brent crude finished 0.3% higher, continuing its follow through  on its recent proper breakout with a further advance above the $75USD per barrel level overnight. Price action continues to suggest some small amount of exhaustion is settling in here with momentum clearly overbought, but upside targets should still be upgraded to the June highs with a note that longer term resistance level above remains in play:

Gold completely fell out of bed on the retail sales print overnight with support disappearing below the recent daily lows, with the key $1800USD per ounce psychological level now turning into obvious resistance. The rejection of previous overhead resistance at the $1830 level in the medium term has always been the big picture here so this is not a surprise. With daily ATR support broken too, the next stage could be a full retracement to the previous flash crash lows at the $1700USD per ounce level:

 

 

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!

Latest posts by Chris Becker (see all)

Comments

  1. Perfect storm in the UK, their power interconnectors failing…….they really need a windy winter……..imagine depending on other countries for electricity

    https://www.bbc.com/news/business-58579829

    Everyone needs a bit of demand destruction for a while especially the Fed or they will be in a similar position on the supply side of their economy as well.

    • Excuse me if I struggle to sympathise with the French after Australia sacrificed almost 70,000 of our young and healthy men- virtually a couple of generations of our finest – to defend and liberate France a couple of times. Then they rewarded us by testing Nukes in the Pacific and murdering Kiwis in their home country in a terrorist attack because the French were offended that their right to pollute the Southern Hemisphere with radioactive fallout was unwelcome.

      So now they’re upset because the contract they’d failed to meet themselves has been binned ?

      Did I miss something?