Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Equity and bond market volatility increased overnight not due to the economic calendar but the twin catalysts of OPEC+ reconsidering their options on the back of oil reserve release plans and the re-nomination of Fed Chair Powell by President Biden. Wall Street was up before the nomination but quickly retraced with the NASDAQ oversold as the gold price took a big nosedive to almost hit the $1800USD per ounce level. The USD strengthened against – well everything – while Treasury yields were quite interesting with the 2 year almost making a 2 year high as the 10 year swiftly returned above the 1.6% level. Oil prices had a wide range with a late rebound while copper and iron ore remain under pressure.

Bitcoin continues its decline from last week after failing to hold on near its recent record highs, almost heading back to the September breakout levels and hovering just below previous key support at the $56K level this morning. The daily chart shows price ready to rollover completely with the downside target at $40K:

Looking at share markets in Asia from yesterday’s session, where Chinese shares diverged again with the Shanghai Composite closing 0.6% higher at 3582 points while the Hang Seng Index went the other way, falling 0.4% to close at 24951 points.  Price action is now right on major short term ATR support at the 24600 point level which needs to hold or it will be a return to the September lows:

Japanese markets steadied somewhat with the Nikkei 225 closing 0.1% higher at 29774 points. Futures are indicating yet another muted start this morning although a tailwind is likely as the USDJPY pair depreciated overnight, with price action still above the daily uptrend line but bunching up near resistance overhead at 30000 points. Is this going to break soon?

Australian stocks felt the psychological pressure of not getting back above previous support with the ASX200 falling over 0.6% to close at 7353 points. SPI futures are down over 20 points, indicating another poor start likely on the open as the break below the 7400 point level sets up a lot of selling. 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 fell across the continent but the FTSE rebounded with continued concerns about regional lockdowns weighing. The German DAX fell over 0.3% to close at 16115 points, closing below its own low moving average on the daily chart and making a new weekly low in the process. Momentum continues to invert from its overbought status as the market could not push beyond the 16300 point level last week, and even a vastly lower Euro is not helping with positive risk sentiment. Watch for another close below the low moving average to push below the 16000 point level:

Wall Street stumbled through the Powell re-nomination and oil volatility with tech stocks suffering the most, the NASDAQ pulling back over 1% to return below the 16000 point barrier while the S&P500 fell 0.3% again after being pushed up at least that high earlier in the session, falling below the 4700 point level to finish at 4682 points. The four hourly chart shows this hesitation quite clearly with the series of higher lows and rising momentum broken overnight,  indicating building support here at the 4670 point level must hold tonight or this will rollover:

Currency market volatility remains relatively high with the USD too strong against everything following the mean reversion evident on Friday night, now reinforced by the Powell nomination. Euro made yet another new weekly low, accelerating below the 1.13 handle with momentum nicely oversold and ready for more downside below:

The USDJPY pair however rebounded sharply, taking price almost back to the 115 handle and matching the previous weekly high. This is a large one off move that could have breakout potential if it breaches the 115 level proper, but watch for a possible mild retracement on any risk off move:

The Australian dollar is still on a great downtrend despite some intrasession volatility yesterday, with yet another new daily/weekly/monthly low made overnight as it careens towards the 72 handle. This continued pressure due to volatile iron ore price and the stronger USD will continue to weigh heavily for the Pacific Peso, still setting up for more downside action:

Oil crude futures were quite volatile around the OPEC machinations, but Brent eventually finished back above the $79USD per barrel level, not enough though to get back above key daily ATR support. Daily momentum remains negative and the series of lower lows with no price action near the high moving average sets up for a further breakdown here as demand constraints build:

Gold however had a major stabbing event overnight on the Powell nomination after teetering through a possible retracement it was pushed off the edge with a fall back to the $1800USD per ounce level, wiping out all upside expectations. This is not good news and comes after not making a new daily or weekly high, as the short term bearish rising wedge pattern has indeed come to fruition here, with short term support at the $1840 level taken out and key psychological $1800 handle the next to likely fall:



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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