Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A solid night of corporate earnings with no surprises and a weaker USD has seen both Wall Street and European share markets continue their bounceback overnight, putting aside continuing concerns over inflation/stagflation. The USD remained weak against both the majors and commodity currencies, although the risk correlated USDJPY pair is stable indicating a strong tailwind for Japanese stocks at least. The bond market saw a continued pullback in yields, this time in response to better than expected US initial jobless claims numbers while commodity prices stabilised with WTI and Brent futures up 1%, copper up more than 2% and iron ore back to business by lifting nearly 4%.

Bitcoin was able to lift ever so slightly overnight after its recent mild dip down to short term support at the $54K level, basing here just below the $58K level this morning. This takes it just above the previous highs earlier in the week with the potential for a breakout towards the previous $60K historic high building:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite eking out a scratch session, down slightly to 3558 points while the Hang Seng Index was closed due to a holiday. 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 rebounded after a minor recent pullback, with the Nikkei 225 closing 1.5% higher to 28550 points. The daily chart was showing a dead cat bounce that hadn’t rolled over, so this move and today’s expected bounce higher as futures gain momentum should put the market back above previous weekly support at the 29000 point level. Daily momentum is not yet positive so that’s the next stage to watch to see if this is just a swing action play only:

Australian stocks were able to lift higher as well, with the ASX200 pushing back above the 7300 point level, closing 0.5% higher at 7311 points.  SPI futures are up nearly 50 or 0.6% points on exuberance over Wall Street overnight with a probable surge towards the 7400 point level, finishing the week at just below previous weekly support, but not yet out of this minor correction:

European markets were no longer mixed with all major and peripheral markets rallying after putting in a base mid week and riding the risk train helped along by Wall Street’s bounceback.  The German DAX finished 1.4% higher at 15462 points with the daily chart showing a definite bounce off that key 15000 point level as a classic swing play as momentum inverts from its previous oversold condition:

Wall Street is riding the stairway to heaven here with a very solid overnight session, the NASDAQ and S&P500 finishing 1.7% higher, the former breaking its daily downtrend while the latter closed at 4438 points and almost doing the same. The four hourly chart shows price following through the 4400 point level and last week’s intrasession high, setting up for a daily basing effort to get out of this minor corrective phase, although in the short term its plainly overdone:

Currency markets continued to reflect a weaker USD in the wake of the mid week US CPI print, with the tapering Fed comments not hindering this short term directional change, although Euro was a little more volatile compared to other pairs. The union currency is being well supported here around the 1.16 handle with a small breakout overnight thwarted but still nominally above previous trailing ATR resistance. I still contend it may not yet be enough to stifle the medium term downtrend until we see a solid move above the mid 1.16 level:

The USDJPY pair was able to stabilise after its recent pullback from the new three year high, finishing this morning just shy of the previous four hourly session highs and the 114 handle itself. The technical picture is indeed stabilising here after the big start of week run up – watch for any intrasession high above the 113.80 level to instigate a new blowoff trend higher as risk market correlation catches on again:

The Australian dollar had a similar setup to gold but it was able to break above the 74 handle overnight on the back of the latest US initial jobless claims numbers, making another new weekly high in the process. Price remains well above the previous weekly highs (solid black upper horizontal line) which I contend is still a solid medium term anchor point but in the short term look for a mild inversion back to the low moving average:

Brent crude futures lifted more than 1% to finish just above the $84USD per barrel level overnight, getting out of a three day pause that took som heat out of recent price action. This rally continues with strong momentum readings as it clears the medium term downtrend with the potential for a retracement to the psychological $80USD per barrel level now dwindling:

Gold is trying hard to breakthrough the $1800 level after basing at the $1760USD per ounce trailing ATR support for over a week, with overnight price action showing some resistance building following thatstronger than expected CPI print. Short term momentum went extremely overbought and is now retracing back to more normal levels with the next stage 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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