Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Overnight share markets were still mixed despite a late rally on Wall Street as bond market volatility continued with Treasury 2 years almost at a two year high while the 10 year almost hit the 1.7% handle before slightly retreating. While Wall Street was up, European stocks continued their selloff amid more COVID lockdown concerns, despite a much weaker Euro. USD was up more than 0.3% against the majors as the Australian dollar dipped below the 72 cent level, while gold remains well below the $1800USD per ounce level. Oil prices haven’t followed through on their sharp bounce back with WTI and Brent crude up slightly, with copper up 1% and iron ore hovering pushing up through the $100 level.

Bitcoin is still trying to build up support here at the $56K level following the decline from last week from the recent historic highs above the $68K zone. The four hourly chart shows price tightly coiled up in the short term with the possibility of a breakout, but longer term readings indicate a possible complete rollover is imminent with the downside target at $40K if support at $55K does not hold:

Looking at share markets in Asia from yesterday’s session, where Chinese shares finally moved in the same direction with the Shanghai Composite closing 0.1% higher at 3593 points while the Hang Seng Index bounced back to be nearly 0.7% higher at one stage before stumbling at the close to only finish up 0.1% at 24685 points.  Not the best one day move with price action still below major short term ATR support at the 24600 point level as the failure to hold now indicates a return to the September lows:

Japanese markets returned from their holiday with aplomb as the Nikkei 225 slumped more than 1.5% to close at 29302 points. Futures are indicating some shoring up at these levels with the added tailwind of a much weaker Yen helping, but price action remains tenuous around the daily uptrend line as the bunching up near resistance overhead at 30000 points has not yet indicated a breakout soon:

Australian stocks were relatively listless with the ASX200 falling about 0.15% to close at 7399 points. SPI futures are once again dead flat, so continued consolidation here around the 7400 point level is likely in today’s session, as the daily chart still remains a jumble of indications, as major internal buying support coincides with little to no upside action. Momentum is nominally positive, but basically neutral here with breakouts likely above high moving average if the 7320 point support level holds:

European markets continue to fall across the continent with only Brexitland again escaping any downside with the FTSE lifting 0.3% while the German DAX fell 0.4% to close at 15878 points, with other markets slowing down in their falls. The DAX again closed below its own low moving average on the daily chart and made a new weekly low in the process with lots of intrasession selling evident, suggesting some support building here again. Momentum continues to invert from its overbought status and remains neutral at best, so this dip has not yet widened into a correction, with the hugely lower Euro helping abate further falls. Watch for a potential stabilising session here tonight, although more COVID lockdowns will not help with sentiment:

Wall Street stumbled around all night before finally finding some positive momentum later in the session with only the headline Dow falling back as the NASDAQ gained some 0.4% while the S&P500 put on just over 0.25% to finish back above the 4700 point level – just. The four hourly chart shows this last session breakout clearly but it may not yet be enough to engage the BTFD train, which has been hesitant in pulling out of the station all week during the decline towards the 4670 point level. This bunching up of price action usually augers well for more upside, but I remain cautious here:

Currency market volatility remains in the USD favour with Euro again making further downside moves after previously hovering at its recent weekly low, now ready to fully retrace below the 1.12 level. Momentum remains nicely oversold and ready for more downside below:

The USDJPY pair however continues to lift with price extending its push above the 115 handle for a five year plus high with nothing ready to displace King Dollar at this stage.  This large move  could have extreme breakout potential, but watch for a possible mild retracement on any risk off move, with four hourly momentum only just overbought:

The Australian dollar is still on a great downtrend as it pushed below the 72 handle overnight after previously decelerating as a rebound in commodity prices – especially iron ore, now above $100 a ton – has not helped in the slightest. This continued pressure due to the stronger USD will continue to weigh heavily for the Pacific Peso, still setting up for more downside action as momentum remains quite oversold:

Oil crude futures reduced in volatility with only minor gains following the co-ordinated multi-national strategic release helping offset the OPEC machinations, with Brent finishing above the $82USD per barrel level again. This keeps it well above key daily ATR support but daily momentum is still negative as this requires a follow through above the high moving average or it sets up for a dead cat bounce and a further breakdown:

Gold continues to be the poor princess at the ball with USD kicking it out of the pumpkin and into the gutter, still well below the $1800USD per ounce level. As I said previously, after not making a new daily or weekly high for some time and taking out short term support at the $1840 level the key psychological $1800 handle has fallen and sets up for more falls below. However, there could be a violent rebound here on the oversold status, so watch carefully:

 

 

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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Comments

  1. Hugh PavletichMEMBER

    New Zealand … relentlessly removing the oxygen from the irresponsible housing bubble … at a national level, the worst in the developed world … about 9.0 Median Multiple overall with Auckland about 12.0 Median Multiple, well above the ‘affordable’ ceiling of 3.0 Median Multiple …

    First home buyers’ share of housing market declines for 2nd straight month as they face a perfect storm turning the market against them … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/113379/sharply-higher-house-prices-rising-interest-rates-and-tightening-credit-criteria

    Reserve Bank wary of households’ sensitivity to interest rate changes in a tightening environment … Jenée Tibshraeny … Interest Co NZ

    https://www.interest.co.nz/public-policy/113371/reserve-bank-wary-households-sensitivity-interest-rate-changes-tightening

    Tony Alexander: Why the Reserve Bank’s decision on interest rates doesn’t really matter … One Roof / New Zealand Herald

    https://www.oneroof.co.nz/news/40554

    … with housing currently hopelessly unaffordable …

    NZ Metros Median Multiples … Interest Co NZ

    https://www.interest.co.nz/property/house-price-income-multiples

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