Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The risk world was surprised by a much lower than expected US unemployment print as the latest jobless claims undershot by over half. European equities all finished lower while Wall Street’s bounceback stalled out completely, leaving Asian share markets with a big headwind to start the new trading week.  USD remained relatively strong against most of the major currencies, with 10 year Treasury yields pushing higher again above the 1.5% level. Meanwhile the commodity juggernaut paused with oil rising slightly, copper falling 2% and gold breaking out before the NFP but then contained once more at the $1750USD per ounce level.

Bitcoin paused on its breakthrough of the $55K level with a minor retracement to consolidate just below its recent monthly high at $54K or so. The daily chart shows how price is above the August highs but momentum is also getting a little overstretched, hence the pullback. The next move is likely to be the previous historic highs above the $60K level but watch for support that must hold here at the $50K level:

Looking at share markets in Asia from Friday’s session, where mainland Chinese markets returned from a near week long holiday with the Shanghai Composite gapping 0.7% higher but fading to close at 3592 points. Meanwhile the Hang Seng Index was treading water before a rally at the end saw it climb 0.5% to the 24836 point level. This breakout above the high moving average has continued after basing for more than a week as this beleagured market built support at the 23500 point level. The return of mainland markets was the catalyst to get things moving, but price action must get past that medium term downtrend line at the 25000 points level for a follow through:

Japanese markets doubled down on their breakout with a 1.3% gain by the Nikkei 225 to close at 28048 points. The daily chart isn’t that promising looking however with price pulling back to match the previous daily highs which don’t look too robust given the recent selling pressure. While momentum readings had pushed into extreme oversold levels there is the potential for a swing play here above the 28000 point level, but I’m cautious:

Australian stocks put in a very solid end to the trading week with the ASX200 finishing more than 0.8% higher to close at 7320 points. SPI futures are pretty flat which is to be expected given the jobs surprise with a pullback likely on the open. 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 but momentum is ready to get out of the oversold stage. Watch for a proper breakout above the 7300 level before getting excited:

European markets were extremely mixed with only the FTSE putting in a positive return, up 0.25% while the German DAX finished 0.3% lower at 15206 points, barely remaining above the key 15000 point level. The overall picture remains quite bearish, with price oscillating around weekly/monthly support at the 15000 point level and has not yet set up for a proper selloff, indicating a possible bear trap. Watch the high moving average at the 15300 point level for signs of a swing higher, but this market and indeed the whole continent will likely follow Wall Street first:

Wall Street pulled back across the board on the disappointing NFP print with the headline Dow treading water, while the NASDAQ finished 0.5% lower as the S&P500 slipped only 0.2% to finish at 4391 points. The daily chart shows how the expected follow through after bouncing off monthly support at the 4250 point level has not eventuated with this surprise, as price action remains below the daily downtrend line from the August highs. We’re in some very murky waters ahead here – watch for any signs of buying pressure to push the market back above 4400 points:

Currency markets were volatile to be sure, but in the end reflected their medium to long term trends as the USD remained relatively strong. Euro remains quite depressed despite a small breakout to the high 1.15’s Friday night but is still very close to the newly made weekly and monthly lows. 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 had a nice push higher on the jobs print, taking out the previous weekly high and surging above the 112 handle in a clear move. This is quite telling and a very straightforward technical picture with the probable chance of a pullback to that level on the Monday gap open if any risk off action accelerates here in Asia:

The Australian dollar continues to follow risk markets with a relatively volatile move on Friday night as commodity prices remained poised following the jobs print miss. I’m reassessing the iron ore boondoggle here as the short term trend looks well supported so far with the Pacific Peso able to stabilise at the 73 level and the previous weekly highs (solid black upper horizontal line). Watch for any retracement below the low moving average however:

Oil prices were well contained on Friday night with Brent crude futures basically unchanged after a momentary blip above the $83USD per barrel level before settling right on the weekly highs at the mid $82USD per barrel level instead. There still hasn’t been much heat out of recent price action which had been pushing well above the medium term downtrend as momentum readings were at overextended oversold levels. A further retracement is now unlikely given price roundtripped to the low moving average so watch for another potential blowout here above the $83 level:

Gold had a major false breakout on Friday night, pushing through the $1780USD per ounce level before getting slammed and back into its cage to finish the week at the  $1755USD per ounce level instead. A lot of purposeful selling here which is very interesting indeed! The inability to break through the downtrend line from the early September rout belies the previous buying support that I thought had been building. 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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