Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A very late selloff on Wall Street reversed risk sentiment overnight with European markets also pulling back, denying a follow through on a mid week surge. The bond market is where all the action is with curve flattening and the 10 year US Treasury yields pulling back firmly, this time finishing just above the 1.5% level as pricing for the next rate hike by the Fed continues to shorten, now a certainty in August 2022. The Bank of Canada’s decision to end QE and rate hike sooner than expected saw the Loonie appreciate somewhat, but the USD remained strong against Euro and Pound Sterling while commodity currencies remain muted as well. Commodity markets were generally in sell mode too with oil prices off 2%, copper and gold down while iron ore slumped.

Bitcoin is in trouble here with the inability to follow through on its recent new record high last week – sucking in a lot of new buyers as the pump and dump schemers have a field day – turning into a rout overnight, pushing it back below the $59K level instead. Short term momentum has gone considerably oversold and while there is support building here at the $58K level the longer term charts are pointing to signs of a wider breakdown:

Looking at share markets in Asia from yesterday’s session, where Chinese shares moved sharply lower with the Shanghai Composite pushed down nearly 1% after it failed to get back above the 3600 point level, while the Hang Seng Index is off nearly 1.6% to close at 25628 points. Price action had been slowing down from its recent upside moves in the past few sessions as it hit a solid level of resistance at the key 26000 points level, equating to the previous September highs. The daily chart is suggesting a follow through on this rollover is possible, with daily momentum readings retracing from their overbought levels:

Japanese markets also failed in their bounceback with a muted session for the Nikkei 225, closing 0.1% lower at 29098 points. The daily chart shows price poised here after a dead cat bounce that failed to get through trailing ATR resistance overhead at 29300 points, with daily momentum still negative, so don’t get excited until we see the recent highs cleared at the 29300 point level or support failing at the 28500 level:

Australian stocks have gone nowhere again, but at least the ASX200 was the only market to put in a positive return, lifting 5 points to close at 7448 points.  SPI futures are down at least 40 points or more than 0.5%, reflecting the late losses on Wall Street overnight. With daily momentum are well into positive readings, its not yet overbought indicating that this uptrend is short term in stature only, despite a desire to return to the former highs in August:

Another solid session was brewing for European markets across the continent as the weaker Euro helped embiggen risk spirits but this was thwarted at the end of the session as machinations on bond markets and inflation fears took over. The German DAX lost 0.3% to close at 15705 points with the daily chart showing a near completion of the fill back to trailing ATR resistance not yet breached at the 15800 point level:

Wall Street wanted to make new highs but it was a combination of the BOC QE cut and much lower bond yields broadcasting risk off, with the NASDAQ dead flat while the S&P500 finished 0.5% lower at 4551 points. The four hourly chart was nearly a straight line before this mid week pause and while you shouldn’t fight the Fed there is the potential for a sharp retracement here below key ATR support or a little below at the 4500 point level proper:

Currency market volatility was overshadowed by bond market volatility with a still strong USD containing the major currencies, with Euro notably stuck here at the 1.16 level after recently breaking below short term ATR support. The union currency is poised here as it could retrace all of its breakout from the last two weeks:

The USDJPY pair was smacked down at the end the Asian session, and then pushed lower overnight to match the previous Friday lows in a risk off move before a mild recovery to almost get back above the 114 handle this morning. Short term price action continues to whipsaw around that level for a couple of weeks now with momentum readings ranging within non overbought/oversold zones so its hard to pin directional leanings here, best to watch levels of support and resistance that might break:

The Australian dollar is wobbling along in what could be considered an uptrend but its very short term and very meagre as the USD remains too strong and commodity prices fail to re-engage to the upside. Yesterday’s inflation print had almost no immediate effect, with overnight traders keeping the lid on upside as resistance at the previous weekly high continues to build here, so watch for any inversion below the 75 handle:

WTI and Brent crude futures had their biggest falls in weeks, with the latter finishing 2% lower to break below the $84USD per barrel level and its own low moving average. I have been concerned about divergent daily momentum readings that have indicated a rounding top pattern for sometime and last night’s price action could be the first step, but its early days yet, as overall price action is still very bullish:

Gold just can’t clear that key $1800USD per ounce level with another attempt overnight thwarted but at least no new daily low was made as buyers remain optimistic. Short term sentiment has shifted from muted to somewhat bullish for gold, with daily momentum pushing into the positive zone, and price action all contained within a rising moving average band, but the potential for a medium term uptrend looks like an actual resistance level at $1830 or so that needs proper clearance:

 

 

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. Hugh PavletichMEMBER

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