Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Bond markets were already leading the way in deciding where risk sentiment lied even before the Republican party screwed the pooch with their debt ceiling nonsense overnight with Wall Street tumbling nearly 3% as a result. Treasury yields spiked above the 1.5% to a three month high while European shares fell in sympathy as the Brexit disaster also rolled on unabated (and unimaginably predictable!) Risk currencies all fell in the wake of the run to the USD, with the majors making new monthly lows in the process while gold fell another 1% again. Commodities were wobbly with oil pulling back slightly alongside copper and other industrial metals while the false breakout in iron ore reversed as it lost 5% or so.

Bitcoin was unable to gain traction again with a steady downtrend from the start of the week down to below the $42K level this morning. Overheard resistance is firming now at the $44K level, with support at $40K the key level to watch:

Looking at share markets in Asia from yesterday’s session, where Chinese stocks stood out for their bullishness, as the Shanghai Composite finished up nearly 0.7% to close at 3607 points with the Hang Seng Index surging even faster, up 1.2% to 24500 points.  The daily chart however remains under a lot of pressure here with resistance continuing to build and another downturn below the 23500 level quite likely given overseas markets trends combined with the stunningly obvious downtrend:

Meanwhile Japanese markets still pulled back despite a softer Yen, with the Nikkei 225 closing 0.2% lower at 30183 points. Futures are indicating more downside on the open today despite the inverse trajectory of Yen so while support is pretty obvious at the 29300 point level it may break given the steep falls on Wall Street and the problems in China:

Australian stocks pulled back sharply, with the ASX200 falling 1.5% to 7275 points. SPI futures are down at least 1% with an indicative break down to monthly support at the 7100 point level.  The daily chart had been showing a potential rollover of the dead cat bounce but price was briefly supported as iron ore prices surged, although that has now been reversed as well. If price breaks theat monthly support line the 7000 point level will next come under threat:

European markets were flat to start with as concerns over the stalled German election lingered, but it was the US debt ceiling stupidity that sent stocks to the floor with only beleaugured Brexit-land escaping a wider selloff. The German DAX lost over 2% to finish at 15248 points taking it back almost to the previous daily lows but definitely setting up for more volatility in the sessions ahead:

Wall Street was already wobbling wildly before last night’s events with the bond selloff precipitating the equity market selloffs. Nevertheless, the debt ceiling vote ruined chances of a recovery with the NASDAQ losing nearly 3% while the S&P500 finished 2% lower to close at 4352 points. This takes price action below the previous neckline at the 4400 point level but not yet below the previous dip lows from a week ago – but close enough! Momentum is not yet oversold here in the short term, so we could see more downside swiftly:

Currency markets remain contained in a downward trend away from USD again overnight, with continued selling pressure against the majors. Euro maintained its bearish trend below the 1.17 handle but did have some minor intrasession oscillation that could be the first levels of support building , although both short and medium term resistance is very strong. Momentum readings are still oversold in the short term with overhead trailing ATR resistance at the mid 1.17 level still nowhere near under pressure, so watch for more downside here:

The USDJPY pair continued its zoom higher above the 111 handle to create yet another new weekly and monthly high but found a small amount of intrasession resistance at the mid 111 level. Momentum remains nicely overbought but price action could be indicating a very minor pause or slowdown here, so watch for a crossover below the overbought reading for a potential reversion back to the 110 level proper:

The Australian dollar was gaining some traction in yesterdays session in line with the recent reversal in iron ore prices but this was thwarted overnight with a solid reversal back to last week’s low at the low 72 level against USD. Overhead ATR resistance remained very solid and prove an anchor point as I suspected so watch for any further weakness to follow below the 72 handle proper:

Oil prices were looking to breakout again overnight, after making new three year highs but were pulled back due to the stupid debt ceiling nonsense in Congress, with Brent receding back below the $78USD per barrel level. Price action is still above the medium term downtrend with momentum readings well oversold here and likely to keep filling in as all short positions are wiped out with support at the low moving average level as a great uncle point:

Gold remains under a lot of pressure as it abandoned the $1750USD per ounce support level and broke below the symmetrical pattern on the bearish daily chart to be at the $1733USD per ounce level. That huge weight of resistance above that has not been cleared in the short or medium term continues to provide no solace for gold bugs, and as I said last week, we could see 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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