Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

While Wall Street continued to rally on solid corporate earnings results, European shares followed the wobbly Asian session with modest falls across the continent as inflation concerns continued to dominate. The US Dollar Index (DXY) was again unchanged, but Euro oscillated and commodity currencies pulled back slightly as the bond market also retreated as the disappointing industrial production print in the US saw Treasury yields retreat below the 1.6% level. Commodities were mixed again as oil futures dropped 1% alongside industrial metals, gold remains depressed and iron ore pulled back slightly.

Bitcoin has stalled out after passing through the $60K level, almost breaching its previous record high (upper solid black horizontal line) but unable to properly follow through as it wavers at the $61K level this morning:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was down 0.5% but managed to recover with only a mild loss at 3568 points while the Hang Seng Index was also down about the same, but rallied at the close to finish 0. 3% higher at 25409 points.   This continues the previous breakout above the high moving average and the beyond the medium term downtrend line at the 25000 points level but for a new trend to develop the next level we need to see a push beyond 26000 points and the usual overbought momentum readings above 100:

Japanese markets floated along with mild losses, with the Nikkei 225 closing 0.2% lower to 29025 points. The daily chart shows a near complete fill of the previous swift corrective phase that took the market down to monthly support at the 27000 point level but trailing ATR resistance overhead at 29300 points is proving too strong so far:

Australian stocks were the odd ones out, with the ASX200 closing 0.3% higher, but still shy of the 7400 point level, finishing at 7381 points.  SPI futures are down over 20 points on commodity pullbacks and Chinese market concerns so this start of week gain is likely to vanish, with daily momentum not yet positive as this remains a swing trade within a sideways bearish move:

European markets all pulled back in unison for a weak start to the trading week as the rebounds from last week faded.  The German DAX finished 0.7% lower at 15474 points with the daily chart showing this bounce off that key 15000 point level still only a classic swing play that has yet to turn into a re-engagement of the major trend, which requires a proper clearance of overhead trailing ATR resistance at the 15800 point level:

Wall Street continued its own bounceback and while the headline Dow pulled back slightly from its recent record high, the NASDAQ and S&P500 both finished higher, the former zooming 0.8% while the latter gained 0.3% at 4486 points. The four hourly chart no longer mimics the German DAX with short term momentum nicely overbought and daily overhead ATR resistance at the 4480 level almost cleared to call this correction over:

Currency markets saw increase volatility levels compared to Friday night, this time in response to the US industrial production print with the four hourly chart of Euro showing wild oscillation around the point of control at the 1.16 handle While the union currency remains somewhat supported here, a series of breakouts have been thwarted above that level but price action remains 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 remained in its stabilising mood after its recent breakout and yearly high, continuing here at just above the 114 handle. The technical picture remains quite bullish but momentum readings are retracing from their overbought settings, which could translate into a further retracement around the 113.70 level above ATR trailing support throughout the week:

The Australian dollar fell throughout the Asian session then caught a fresh tailwind going into the European session as temporary USD weakness saw it move back above the 74 handle again.    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 momentum is slowly waning – so watch the usual iron ore correlation which could pickup again here:

Brent crude futures pulled back around 1% to start the week just above the $84USD per barrel level, after trying to breakout further intrasession as this stonking rally continues. Strong momentum readings and price action well above the previous medium term downtrend indicates more upside potential although as volatility goes lower, the possibility of a retracement increases. Uncle points at the trailing low moving average level are doing well for now to lock in profits:

Gold’s failure to breakthrough the $1800 level is continuing to weigh on sentiment for the shiny metal with another down day pushing it back to the $1764USD per ounce level overnight. As I said about the Friday night session, this one day price move is worrisome, so watch for a possible retracement below the low moving average here on the daily chart for a probable return to the recent lows at the $1727 level:

 

 

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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