Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A bath of blood on Wall Street overnight as we head into the next FOMC meeting with Fed tapering fears overwhelming risk sentiment with 2% plus falls across European and US stock markets. The USD was mixed with Euro and Aussie dollar largely unchanged from their start of week slump, while Yen soared on the safe haven bid. Treasury bond yields also fell back sharply with the 10 year pulled back to 1.27% after recently almost hitting the 1.4% level. Commodities fell back in line with stocks, while iron ore made another new epic low which will continue to weigh on local shares with SPI futures indicating further big falls ahead.

Bitcoin flumped overnight alongside other cryptocurrencies with a swift move back to daily ATR support at the $43K level with a wider correction phase definitely possible here:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was closed but the Hang Seng Index suggested much steeper falls coming for Chinese stocks, losing over 3% to close at 24099 points for a new monthly low. The daily chart has been showing price unable to get out of its medium term downtrend with momentum remaining broadly oversold. The 25000 point level was the key area to watch as the Evergrande catalyst rolls on, with this collapse in sentiment to send it back to the late 2020 lows nearer 22000 points:

Japanese markets were closed but Nikkei 225 futures are indicating a walloping on the open today with the daily chart showing the very overextended rally ready to invert sharply as the 30000 point level firms as the obvious resistance level. Deceleration has been quite obvious for a while now so a close below the lower moving average is likely to wipe out any support:

Australian stocks sold off fast and fierce with the ASX200 closing more than 2% lower at 7248 points after medium term support had been wiped out last week in advance of the rout. SPI futures are down another 1% ore(sic) more so this rout is going to continue and likely take us back to the pre July rally level around 7100 points:

European markets caught the risk off bug from Asia and then some when Wall Street opened with broad selloffs across the continent as the German DAX was the wurst (sic) casualty, some 2.3% lower at 15132 points. The daily chart had been building on its previous bearish picture, with ATR support at the 15500 point level barely holding on, so this breakdown was not unexpected, taking the markets back to the July lows where traders are anxious to see what happens next. This move is way overdone and ripe for a pullback, but that depends on Wall Street:

Wall Street’s jitters about Chinese stocks, COVID and the upcoming FOMC meeting came to pass overnight with all three bourses suffering broad losses, with the NASDAQ leading the way, down 2% while the S&P500 closed 1.7% lower at 4357 points. The four hourly chart has shown a series of pullbacks that has formed the right hand shoulder of a large bearish head and shoulders pattern on the daily chart, with the neckline at the 4400 point level breaking overnight. This move is quite overhead, having gone through the late July lows with momentum extremely oversold and ripe to pullback with the last four hourly candle giving some hope to bulls that a swing play may come next:

Currency markets reduced in volatility with the USD overall largely unchanged as Euro for once stopped selling off, getting back to its Friday finish at just above the 1.17 level although it did make a new weekly low intrasession. Momentum had been considerably oversold so this wasn’t that much of a surprise but there’s not much potential here to turn it into a proper swing position with short positions still adding to any rallies for the last two weeks:

The USDJPY pair was flummoxed on the Yen safe haven buy with a big reversal overnight as resistance at the 110 handle that had formed on Friday was completed with a selloff down to the 109.40 level instead. Short term momentum is now nicely oversold but price action did not meet last week’s intrasession low, so with the return on Japanese traders we could see a small uptick here, although the medium term trend remains solidly down:

The Australian dollar was finally able to steady itself following the full on iron ore led deflation that has pushed the Pacific Peso well below the 73 handle in recent weeks. Overhead ATR resistance is very solid here although some support is slowly building above the 72 cent level it may not be enough to stave off the ongoing selloff as iron ore continues to dive:

Brent crude finished 2% lower in line with risk sentiment, still unable to substantially continue its follow through on the recent breakout with resistance slowly building here at the $75USD per barrel level. Price action continues to suggest exhaustion is settling in here with momentum rolling over from its prior overbought levels, with the June highs at $77 plus possibly out of reach now:

Gold was able to keep firm in the wake of the risk off events, finishing almost $10 higher at the $1764USD per ounce level. Daily ATR support remains broken and price has a ways to get before returning to the $1800 key level too, so watch for the recent daily lows that must be supported here or 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!

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