Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Wall Street and European share markets came back overnight, putting aside concern over inflation and supply chain problems despite the latest US CPI print coming in stronger than expected, with tech heavy stocks lifting the whole risk complex. The USD however had a big reversal in direction against both the majors and commodity currencies in response, with the Australian dollar almost pushing through the 74 handle. The bond market saw a larger pullback in yields in response to the CPI print with the 10 year Treasury falling from 1.72% to 1.64% while commodity prices were all over the place as oil was steady, copper and gold lifting and of course iron ore dropping nearly 6%.

Bitcoin was able to bounceback after a mild dip down to short term support at the $54K level, getting above the $57K level this morning, almost matching the previous highs earlier in the week. While this looked like a rounding top bearish pattern on the four hourly chart it had not been confirmed with a break below ATR support, so watch for a potential breakout instead:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was down nearly 0.4% before the lunch break but reversed that to actually finish 0.4% higher at 3561 points while the Hang Seng Index was closed due to a typhoon warning. 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 could not get back into forward gear with the Nikkei 225 closing 0.4% lower to 28140 points. The daily chart is still showing a dead cat bounce that has not yet rolled over, with a slightly stronger Yen perhaps pushing it back down again on the open today. Note that price action is still unable to get above its own high moving average and while momentum readings have retraced from their oversold levels, its still nowhere near positive:

Australian stocks were again the best performers, but still went backwards with the ASX200 remaining under the 7300 point level to close 0.1% lower at 7272 points. SPI futures are up over 50 points on exuberance over Wall Street overnight with a probable surge above the 7300 point level after bunching up like a coiled spring just below the high moving average on the daily chart. Momentum is ready to get out of the oversold stage as well so stay tuned:

European markets were mixed again with peripheral markets this time pulling back as major markets including the German DAX jumping back on the risk train, the latter finishing 0.7% higher at 15249 points. The key 15000 point level remains the line all traders are watching but a classic swing play is setting up here so watch the high moving average at the 15300 point level as momentum inverts from its previous oversold condition:

Wall Street was finally able to find buyers with tech stocks helping push up all three main bourses, although the Dow eventually closed with a scratch session, the NASDAQ was up 0.7% and the S&P500 finished 0.3% higher at 4363 points. The four hourly chart showed price teetering at short term ATR support and indeed its still not really moving much higher above that level, so while the BTFD crowd might be around the corner with a possible follow through up to 4400 points, this isn’t looking promising yet:

Currency markets had a large inversion overnight due to the US CPI print with the formerly strong USD reversing against the majors, commodity pairs and gold with Euro leading the charge after being oversold for several weeks. The union currency had made a mid week low that almost breached the 1.15 handle before a big reversal that still only took it back to last week’s resistance level just below the 1.16 level. While this nominally clears overhead trailing ATR resistance it may not yet be enough to stifle the medium term downtrend:

The USDJPY pair pulled back from its new three year high to be just above the 113 level this morning in a fairly muted reaction to the CPI print overnight. 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. This retracement could extend further so watch for another close below the low moving average in the short term:

The Australian dollar had an engulfing bullish candle response on the four hourly chart against the US CPI print, making a new weekly high and almost hitting the 74 handle proper. While commodity markets were mixed, they remain in an uptrend and so does the Aussie against almost anything, but it remains to be seen what will happen with iron ore. Price remains well 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 only slightly to again finish just above the $83USD per barrel level overnight, turning this into a three day pause to take some heat out of recent price action. This rally continues with strong momentum readings as it clears the medium term downtrend but as I noted previously, there is some exhaustion setting in here, with a possible retracement to the psychological $80USD per barrel level building:

This time it was a proper breakout for gold overnight after basing at the $1760USD per ounce level and trailing ATR support for over a week, the stronger than expected CPI print giving gold bugs another shot at redemption. Price shot up to a new monthly high just shy of the $1800 level, with short term momentum now extremely overbought but price action ready to support it here after this one off move. The next stage is to close the week out at or near this level to definitively break above the downtrend line from the early September rout:

 

 

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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