Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Action on Friday night risk markets was turned around due to a combination of new month window dressing and some certainty around US government funding which saw Treasury yields pull back below the 1.5% level and Wall Street rally just over 1% across the board. European shares were still troubled by the latest inflation print that was higher than expected and resurge in risk currencies, while commodities saw strong upside action with oil and copper up 1% and 2% respectively and gold largely unchanged.

Bitcoin surged as it broke out of its holding pattern at the $44K level, making a run for the $49K level and matching the previous weekly highs as the absence of Chinese influence saw the crypto currency run amuk:

Looking at share markets in Asia from Friday’s session, where Chinese markets were closed for a holiday and won’t reopen until later this week. The daily chart of the Hang Seng Index remains bearish and under a lot of pressure here despite some support continuing to build at the 23500 level, with a very small potential for a breakout above the high moving average at the 24800 point level on the reopen:

Instead, it was all about selling in the rest of the region with Japanese markets pulling back strongly in fear as the Nikkei 225 closed over 2% lower to 28818 points. Futures are indicating a minor uptick on the reopen, not helped by Yen which continues to strengthen against USD. Support had been pretty firm at the 29300 point level, but Friday’s action saw it brushed aside and almost revert back to trailing ATR and weekly support at just below 29000 points. Momentum needs to hold here without a new session low or there will be a wider selloff:

Australian stocks could not escape the carnage, with the ASX200 taking back all of its recent gains and then some, down 2% to finish at 7168 points. SPI futures are indicating at least a 0.5% blip higher on the open due to the reverse in risk sentiment on Wall Street Friday night but this is nowhere near enough to arrest the decline in risk sentiment on local stocks.  The daily chart is now poised to break below monthly support at the 7000 point level that will next come under threat as buyers evaporate:

European markets were unable to get any momentum as a rise in Euro on the back of the latest inflation print dampened risk taking. The German DAX lost another 0.7% to finish at 15156 points. The overall picture remains quite bearish and Friday’s session solidified the move lower to  weekly/monthly support at the 15000 point level with daily momentum remaining oversold and the price pattern almost completing a rounding top:

Wall Street however finally ran out of sellers with the debt ceiling nonsense put aside for another month or so, helping lift the NASDAQ 0.9% while the S&P500 gained more than 1.2% to close at 4357 points. The four hourly chart shows this fill is still quite meek given how the previous sessions show some steep selling off and overhead resistance still quite firm at both the 4400 and 4470 point levels. Notably, even short term ATR resistance has not been thwarted as this price action barely took back the previous intraweek low. This is not yet over as momentum remains negative:

Currency markets had a minor reversal session with waning USD strength turning into some small upticks with Euro finally finding a base here at the 1.16 handle after weeks of selling pressure that made a yearly low. Momentum readings were extremely oversold in the short term so a swing higher was not unexpected but price action is nowhere near overhead trailing ATR resistance now at the 1.1650 mid level, so watch for another close above the high moving average to get things moving proper:

The USDJPY pair continued its own minor reversal after failing to cross above the 112 handle last last week after creating another new weekly and monthly high, Friday night saw price move back to the 111 handle proper for a solid retracement. This will remain a big headwind effect on Japanese shares but four hourly momentum is not yet oversold although volatility is low, with no sign yet of a reversal or fill in USD buying:

The Australian dollar was able to continue its move higher after bouncing off the recent monthly lows below the 72 handle as USD strength continued to wane against the commodity majors following the GDP print.  Price has found resistance however at the ATR four hourly target at the 72.70 level with momentum readings not yet overbought, therefore not indicative that this trend can continue higher. As I said last week, longer term charts are still pointing to more downside below with parity at the 70 major handle the next likely target:

Oil prices continued their breakout on Friday night, after recently making new three year highs with a modest move higher as Brent crude futures managed a 1% lift to finish above the $79USD per barrel level. Price action is still pushing higher above the medium term downtrend with momentum readings now retracing from the overextended oversold levels here with support at the low moving average level still a good uncle point:

Gold was able to continue its mild bounceback, moving to the $1760USD per ounce level but not yet breaching the high moving average on the daily chart. However, daily momentum is no longer oversold and the conditions are ripe for a swing play here that could turn into a semi rally back up to the previous highs. A failure to build support here however will otherwise move to 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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