Macro Morning

See the latest Australian dollar analysis here:

Australian dollar free falls as Fed hikes return

Risk appetites inverted overnight with a lack of economic catalysts save an easing in Chinese monetary policy following the disappointing US unemployment print from Friday night. European shares rebounded the most while Wall Street took back almost all of their Friday slump as the bond market saw a slight easing in yields as the 10 year Treasury yield went back above the 1.4% level. Currency markets also saw a slight reversal in USD strength although Euro remained flat, the Aussie dollar lifted following an extreme oversold position. Commodity markets had a nice rebound as well with both Brent and WTI oil up nearly 4%, copper nearly 2% but gold is strill struggling to bounce back above the $1800USD per ounce level.

Bitcoin had a mammoth drop over the weekend, seeing it lose more than 20% and breaking well below the $50K level, finishing this morning under $49K after a very mild bounce back.  The daily charts had been looking bearish for sometime now as daily resistance built above the $59K level so while not unexpected, the size of this dump certainly was! Where to from here? Next support levels are at the September lows around $43K, with daylight below to $30K next:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares fell sharply in the closing session with the Shanghai Composite down 0.5% to cross back below the 3600 point level while the Hang Seng Index continued to bury itself with another deep loss, down 1.8% to 23349 points.  This market remains in the doldrums with daily momentum remaining well oversold with upside price action going nowhere indicating a lack of buyers. While there is potential for more downside as terminal support at the 23000 point level comes into view, there’s also a potential swing play above the 23800 point level due to a reversion in momentum:

Japanese markets remained under pressure with the Nikkei 225 closing 0.4% lower at 27927 points.  Futures however are indicating a better start today in line with other risk markets, helped along by a weaker Yen overnight. Price is bunching up at the September support levels just above 27000 points, as momentum swings back from a very oversold condition as the potential for an upswing setup builds again here:

Australian stocks were one of the lucky ones, with the ASX200 just able to put in a positive session, lifting 0.1% to close at 7245 points. SPI futures are up nearly 0.5% alongside other risk markets which should stave off another attempt to breakdown and head back to monthly support at the 7100 point level.  The lack of a new daily high since the late November slump has been weighing on sentiment here so a breakout is long overdue:

European markets all had a very solid start to the trading week with near 1.5% increases across the continent, with the German DAX finishing 1.4% higher at 15380 points. The daily chart is also showing price action bunching up at the September lows as daily momentum pushed into extremely oversold levels, but this could be the start of a swing back as a lower Euro will help risk spirits. Again, wait for Wall Street to provide the lead:

Wall Street flipped from its Friday selloff into a more ebullient mood overnight with the NASDAQ up nearly 1% while the S&P500 took back its recent losses to rise 1.2% to the 4591 point level. The four hourly chart shows price action breaking out above the week plus long downtrend, taking away the potential of this turning into a proper correction, but it requires another move higher to clear trailing ATR resistance at the 4630 point level:

Currency market volatility pulled back somewhat and in general didn’t engage in the same risk reversal seen on commodity and stock markets. Euro maintained its mild deflation and remains below the 1.13 handle with the four hourly chart still showing no change in this decline as price heads towards firm support at the 1.1270 ATR level. Momentum is now nominally oversold so the potential for a breakout is receding quickly:

The USDJPY pair found a bit of life as Yen safe haven buying pulled back a little with the pair boosted past the Friday night session highs to get the mid 113 level. This pair also has the short term potential of  swing higher, lifting up towards overhead resistance at the 114 handle as momentum continues its inversion but medium and long term chart weigh against any larger change:

The Australian dollar also bounced back from its steep decline on Friday night with a move back above the 70 handle, but this still keeps it well on track as the medium term downtrend continues. This is likely to be shortlived, requiring another catalyst to get moving and with strong resistance overhead:

Oil prices rallied alongside European shares as sentiment around Omicron’s impact on demand continues to shift with the Brent marker finishing 4% higher to almost crack through the $74USD level. Short term volatility was pointing to a potential bounceback but can this have the legs to get back to the former monthly resistance level at $77 which is still a long way away:

Gold is still looking depressed here unable to follow through with another new daily high above the $1780USD per ounce level, dicing with that former daily support level in a very flat trend. Momentum has shifted to straight neutral settings, and while price action may be suggesting a possible bottom here it really requires more upside proof with a  new daily high that at least heads towards the $1800 level:

 

 

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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