Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Friday night saw risk sentiment continue to wobble with European COVID restrictions pulling down oil prices significantly, with inflation concerns still lingering. Wall Street was quite mixed as tech stocks soared, while the S&P500 faltered alongside European bourses which retreated across the continent. USD strength is back on track with the Euro putting in a 16 month low, while the  Australian dollar remained under a lot of pressure even as iron ore spiked back above the $90 level.  Treasury yields fell back again with the 10 year retreating well below the 1.6% level while gold deflated once more to retreat from its recent high. Oil futures lost well over 2% on the new lockdown measures in Germany and Austria.

Bitcoin has been in a decline all week after failing to hold on near its recent record highs, giving new crypto “investors” some pause when buying at the high. Friday night saw it crack below key support at the $56K level with the daily chart showing the market ready to rollover completely with the downside target at $40K:

Looking at share markets in Asia from Friday’s session, where mainland Chinese shares lifted with the Shanghai Composite putting in a big surge in late trading, up over 1% to 3558 points while the Hang Seng Index went gone the other way, following through on its breakdown to be off by more than 1%, slumping to 25047 points.   Price action wanted to follow through on the one-day breakout reversal, but hesitation over the medium term downtrend just can’t be pushed aside with major short term ATR support at the 24600 point level needing to hold:

Japanese markets had a solid bounceback with the Nikkei 225 closing 0.5% higher at 29745 points. Futures are indicating a muted and possible much lower start this week as the USDJPY pair depreciated overnight, so combined with the risk off mood in general and waning daily momentum, we could see a breakdown of the current daily uptrend line. Its still all about resistance overhead at 30000 points, which continues to look too strong here to get things moving back to the September highs:

Australian stocks were able to lift marginally but the ASX200 still failed to close above the 7400 points level, rising only 0.2% to finish at 7396 points. SPI futures are down over 50 points, indicating a poor start likely on the open of this new trading week as the break below the 7400 point level is all but confirmed. The daily chart remains a jumble with a lot of internal buying support but no upside action above these levels as momentum continues to roll over to neutral settings:

European markets were again unified in their reversals with increasing minor losses across the board as the German DAX failed to finish the week on a good note, falling over 0.4% to 16159 points. Momentum has inverted from its nicely overbought status as the market could not push beyond the 16300 point level all week, with the recent reversal in Euro slowing things down considerably. Watch for a proper breakdown below the low moving average here on the daily chart:

Wall Street was quite mixed with the NASDAQ heading to a new record high, up 0.7% to climb above the 16000 point barrier while the S&P500 took back its recent gains and fell over 0.3% to close the week out at just below the 4700 point level. The four daily chart is still showing resistance above that should be normally easy to clear in this runaway bull market, with higher lows indicating building support here at the 4670 point level despite the Friday night hiccup:

Currency market volatility is still relatively high with the USD remaining strong in the long term versus the majors with more mean reversion evident on Friday night. Euro flopped back to a new weekly low, heading straight below the 1.13 handle as its failed swing trade rolled over at the mid 1.13 level, confirmed by a failure to push past a neutral momentum setting and overhead ATR resistance. This sets up for more downside below:

The USDJPY pair however also stumbled, due mainly to risk off Yen safe haven buying as it rejected short term resistance at the 114.50 level, closing the week out right on the 114 handle. This  second retracement is not unexpected, given the sharpness of the first and the failure to get back above the previous weekly highs (solid black horizontal lines). With momentum now oversold there is the potential for a follow through rollover here below the 113.70 level:

The Australian dollar is still on a great downtrend and almost broke down completely to get through the 72 handle on Friday night in the wake of the stronger USD.  This continued pressure due to the falling iron ore price and the stronger USD will continue to weigh heavily for the Pacific Peso, still setting up for more downside action – turn the four hourly or daily chart upside down and you’d be bullish:

Oil crude futures collapsed on Friday night with Brent falling more than 2% to finish well below the key $80USD per barrel level, taking out daily ATR support and finishing with a new monthly low just above the $78 level. Daily momentum had already switched to negative and the series of lower lows with no price action near the high moving average set up this possible breakdown as I warned on Friday. This could be the precursor to further falls but never discount volatility in oil:

Gold is also on edge after a runaway trend that paused at just below the $18800USD per ounce level has turned a mild consolidation into a possible retracement with a fall back below the $1850 level on Friday night. After not making a new daily or weekly high, the short term bearish rising wedge pattern may well come to fruition here still, so watch short term support at the $1840 level which must hold:

 

 

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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