Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street and European share markets stumbled again overnight as concern over inflation and the upcoming US earnings season continued to weigh on risk taking. The USD remains relatively strong against most of the major currencies, with Euro breaking down again, and USDJPY up to a three year high. The bond market saw a minor pullback in yields with the 10 year Treasury down below the 1.6% level after recently making a new six month high. Commodity prices all fell back from their overextended highs with oil and copper down nearly 1%, gold basically unchanged and iron ore dropping nearly 6% after a near 10% surge to start the week.

Bitcoin was unable to make any further highs on its breakthrough trade above $50K, pulling back to trailing short term support at the $53K level before consolidating just below the $56K level this morning. This looks like a rounding top bearish pattern on the four hourly chart but won’t be confirmed until ATR support below is broken:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite closed 1.2% lower to 3546 points while the Hang Seng Index is follow along by taking back most of its previous surge, down 1.4% to the 24962 point level. The breakout above the high moving average has not yet translated into a proper new trend with daily momentum neutral at best as price action must get past that medium term downtrend line at the 25000 points level for a follow through:

Meanwhile Japanese markets reversed gear with the Nikkei 225 closing 0.9% lower to 28230 points. The daily chart is showing a dead cat bounce as the very steep ditch is proving very hard to climb out despite a very weak Yen. Note that price action was unable to get above its own high moving average and while momentum readings have retraced from their oversold levels, its still nowhere near positive. I remain cautious here with a view to breaking below the low moving average yet again:

Australian stocks were the relative winners, but its a moot point as the ASX200 remained under the 7300 point level, closing 0.3% lower to 7280 points. SPI futures are up nearly 20 points or 0.2% despite lower sessions on Wall Street overnight. This market is still poised between relatively tight bands of support and resistance with daily price bunching up but not yet able to break above the high moving average on the daily chart. Momentum is ready to get out of the oversold stage but has not yet translated into upside gains:

European markets were mixed again with peripheral markets lifting slightly while major markets including the German DAX continued to wobble, the latter finishing 0.3% lower at 15146 points. The key 15000 point level remains the line all traders are watching and anchoring expectations with price oscillating at this weekly/monthly support juncture. Watch the high moving average at the 15300 point level for signs of a low probability swing higher, with momentum still negative and indicating more downside first:

Wall Street was again unable to find buyers with small stepbacks across the three main bourses, with the S&P500 finishing 0.2% lower at 4350 points. The four hourly chart shows price teetering at short term ATR support and ready to collapse below to monthly support at the 4250 point level. I still contend the BTFD crowd is still around the corner so watch for any signs of buying pressure to push the market back above 4400 points:

Currency markets continue to broadcast a strong USD against the majors as Euro broke down below its recent weekly and monthly lows as it heads straight for the 1.15 handle. 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 barely continued its push higher above the 113 handle but did eke out a new three year high at the mid level where it paused this morning. As I said yesterday, this is a very straightforward technical picture that in the short term looks way overdone with the growing chance of a pullback as momentum went extremely overbought. We’re seeing a retracement in the latter now, but not yet in price so watch the low moving average in the short term for a possible pullback:

The Australian dollar is playing correlation games alongside commodity markets with its uptrend through the 73 handle pulling back after getting overextended just like oil and iron ore with the mid 73 level but not the four hourly low moving average broken through overnight. Price remains above the previous weekly highs (solid black upper horizontal line) which I contend is still a solid medium term anchor point:

Brent crude futures pulled back meekly to finish just above the $83USD per barrel level overnight, barely taking much heat taken out of recent price action. This rally continues with strong momentum readings as it clears the medium term downtrend but there is some exhaustion setting in here, so my contention of a possible retracement with a move to the low moving average at the psychological $80USD per barrel level is something to watch:

Another false breakout for gold overnight that has led to a reversion back to the average price for the last week and half for the shiny metal, finishing at the $1760USD per ounce level, just above trailing ATR support. Short term momentum is seemingly on the positive side but it just can’t grab a longer term view above the $1775 level due to the inability to break through the downtrend line from the early September rout. Watch ATR support here closely for a possible correction:



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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  1. PalimpsestMEMBER

    I was really struck by how leveraged long the retail crowd was before the ease-off. Margin calls come at about the 2% drop. A slow rollover can be really psychologically taxing on a leveraged long position. BTFD are still around, waiting for this to take off, but some enthusiasm might be wearing off. I’d have to follow Zerohedge to get a better reading of sentiment, but some sacrifices are too much, even if it means making money. The articles can be interesting, but the commentary is too hard to take.

    Thinks – I wonder if I could run an AI sentiment engine over zerohedge comments so I don’t have to actually read them.

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