Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Wall Street was able to bounceback yet again after European equities sold off sharply overnight with yet another reversal in risk sentiment as the latest machinations around the US debt ceiling and the leadup to the non-farm payroll/employment print builds with an uptick in private jobs data. Bond markets saw a stretch in the yield curve with shorter term Treasuries lifting while the 10 year Treasury yield pulled back again to the 1.5% level as risk currencies remained under pressure from the strong USD. Commodities pulled back as oil reacted negatively to the latest US inventory print while copper pulled back as well and gold was contained.

Bitcoin continued its surge to break through the $55K level overnight for yet another new monthly high. The weekly chart is very illustrative here of what has happened to the crypto currency since crashing earlier in the year, basing at the $32K level and soaring higher ever since. Nominal ATR resistance is about to be broken as it heads towards the previous historic highs above the $60K level – is this the start of the next new upleg or just another pump and dump scheme:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese markets remain closed for a holiday while the Hang Seng Index pulled back to finish 0.5% lower at just below the 24000 point level. There continues to be the potential for a breakout above the high moving average at 24800 points as this beleagured market tries to build support at the 23500 point level but sentiment is failing here as we await the return of mainland markets, so caution for now:

Japanese markets also continued in their sell mode with the Nikkei 225 closing 1% lower to 27528 points. Futures are indicating a mild bounceback on the reopen, with the recent daily/weekly lows at the 27000 point level only just supported by price action. Momentum readings are pushing into extreme oversold levels so despite some strengthening of Yen overnight this market is ripe for a proper swing back higher:

Australian stocks reversed their previous gains with the ASX200 closing nearly 0.6% lower to 7206 points. Another whipsaw is on the cards as SPI futures are up nearly 40 points or 0.4% due to yet another reversal in risk sentiment on Wall Street overnight. Monthly support at the 7000 point level remains key here with daily price bunching up but not yet able to break above the high moving average nor momentum getting out of the oversold stage. Watch for a proper breakout above the 7300 level before getting excited:

European markets flipped immediately into broad selling mode as negative sentiment came back strongly, with the German DAX finishing more than 1.4% lower at 14973 points, crossing the key 15000 point level but regaining some in post close futures. The overall picture remains quite bearish and this break below weekly/monthly support at the 15000 point level is setting up for a proper selloff, as daily momentum remains oversold there is the slim chance of a swing trade higher here:

Wall Street whipsawed throughout the session but eventually came back due to debt ceiling negotiations and solid private jobs data with the NASDAQ up nearly 0.5% while the S&P500 finished 0.4% higher at 4363 points. The four hourly chart shows the range trading we’ve seen since the Friday session with support at 4250 points and overhead short term ATR resistance at 4350 points still providing the entry/exit points requires to play this action:

Currency markets were still reflecting a strong USD throughout the overnight session although commodity currencies came back slightly higher later despite the fall in oil and industrial metals. Euro discarded the base at the 1.16 handle and fell straight down to the low 1.15’s instead with a minor blip later seeing it finish at the mid 1.15 and making a new weekly and monthly low in the process. The union currency remains the one not to bid for now with price unable to go anywhere near overhead trailing ATR resistance:

The USDJPY pair pulled back slightly from its Asian session surge that saw it nearly get back to the 112 handle yesterday, finishing near the 111.40 this morning with positive momentum still holding. The key limiting factor here is the inability to get back above the previous resistance/support zone above the 112 level that it failed to break out of last week, so while this little breakout is interesting it may not hold:

The Australian dollar is following risk markets somewhat with a large whipsaw overnight down to the 72 handle and then almost back to the start of week position just short of the 73 level. This whipsaw is largely because of commodity movements but also due to the inability in crossing above the previous week’s intrasession high at the 73 handle proper which I still contend is setting up for a big bear trap when Chinese markets reopen:

Oil prices were smashed back to reality somewhat on a bearish inventory report and suggestions of a release of the strategic reserve in the US but overall, a 2% drop wasn’t that unexpected in WTI and Brent crude futures as they were way overextended. The latter fell back slightly below the $81USD per barrel level, taking some heat out of recent price action which had been pushing well above the medium term downtrend as momentum readings were at overextended oversold levels. This retracement could increase in coming sessions so watch for short term support at the $80 level and then medium term support at $77:

Gold was able to hold on to its recent bounceback despite the continually strong USD, but failed to make a new daily high, finishing at the $1763USD per ounce level. Note the daily chart showing a lot of intrasession buying support (long tails under the daily candles) but an inability to break through the downtrend line from the early September rout. Momentum remains negative so everything is weighing against any further upside potential:



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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