Macro Morning

See the latest Australian dollar analysis here:

Australian dollar free falls as Fed hikes return

Equity markets diverged in fortune overnight with an overdue bounce on European shares not followed through on Wall Street as concerns over Fed Chair’s Powells hawkish stance tripped up risk taking, with 2% plus falls the result. The bond market was shaken up as well with the 10 year Treasury yield falling back to just above the 1.4% level as pricing indicates July next year as the first Fed rate hike. Currency markets were a little more sanguine with USD firming against most of the majors as the Australian dollar again broke below the 71 cent level. Commodity markets continue to see downside volatility with Brent crude contained below $70USD per barrel while gold remains below its previous daily support level as is hovering just above the $1780USD per ounce level.

Bitcoin remains in a tenuous slight downtrend, unable to breakout above the $58K level again overnight.  The four hourly and daily charts still look bearish as daily resistance at the $59K level has not yet been cleared, although short term support is still firm at $56K:

Looking at share markets in Asia from yesterday’s session, where rebounds abounded with the Shanghai Composite lifting sharply into the close, finishing 0.4% higher at 3576 points while the Hang Seng Index finally put in a strong upward session, finishing 0.8% higher at 23658 points.  I had warned previously of a large potential for a follow through here as price was pushed below the September lows, but cautioned that a violent swing to the upside was plausible. This move hasn’t been as big as I expected, with daily momentum still extremely oversold so it could be a one off and more downside to follow:

Japanese markets tried to stabilise with the Nikkei 225 closing 0.4% higher at 27935 points. Futures are indicating more falls on the open, not helped by a higher Yen as price is now dicing with breaking below the September support levels just above 27000 points. Momentum remains very oversold, setting up for further downside:

Australian stocks had a mild selloff with the ASX200 eventually closing 0.3% lower at 7235 points. SPI futures are indicating at least a 1% drop on the open given the overnight volatility on Wall Street, so watch for a potential rollover to the next level of monthly support at 7100 points:

European markets had another volatile night but this time it was all strong upside with the German DAX lifting more than 2% to 15472 points, but it looks worst intrasession with the 15000 point level broken. The daily chart is showing some buying at the September lows and while this still has the potential to swing wildly higher on any positive news, the bears remain fully in charge here as daily momentum remains extremely oversold:

Wall Street was looking to follow on but the hawkish Powell comments pushed the whole edifice over with the NASDAQ falling over 1.8% while the S&P500 made its biggest two day loss in over a year (but still up 25%!) down another 1.1% to finish at 4513 points. The four hourly chart shows price action failing again to make any upside action, with the high moving average becoming resistance on its own. As I said yesterday, this has the power to extend further south if the BTFD crowd does not step in and make a repeat of February last year:

Currency market volatility reduced somewhat despite further comments from Fed Chair Powell on inflation, with the latest ISM manufacturing survey better than expected helping USD somewhat. Euro was relatively calm, trading in a tight range against USD again, remaining slightly above the  1.13 handle. The four hourly chart remains nominally bullish with positive momentum building and a direction forming if you look through the intrasession volatility, and while the overall downtrend is still in play, there is growing potential of a follow through here above the previous weekly high at the 1.1370 level:

The USDJPY pair remains in opposite mode with more downside volatility overnight that matched the intraweek low just below the 113 handle as Yen safe haven buying continued. The pairs looks fragile again this morning with price action moving lower as the four hourly moving average band points down and momentum extends into oversold status with more downside possible on further risk off moves:

The Australian dollar had a very interesting setup yesterday following the surprise uptick in 3Q GDP with a move above the recent session highs indicating a potential short term bottom was in. However, this was thwarted overnight with a big kick down to the 71 handle again on the back of the ISM print, lower commodity prices and stronger USD. Short and medium term momentum are still oversold, and commodity prices showing no signs of recovering:

Oil try to rally at first but this was again quickly shutdown with Brent finishing more than 2% lower to cross below the $69USD level again. Volatility remains high with no real signs of bounceback as the former monthly resistance level at $77 proves too strong alongside very negative momentum:

Gold also remains in the doldrums with another near return to the its recent lows as price hovers around nascent support at the $1780USD per ounce level, still unable to make any new session highs following the fallout from Fed Chair Powell’s comments.  Momentum remains quite oversold in the short term and setting up for more downside below:



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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