Macro Morning

See the latest Australian dollar analysis here:

Australian dollar free falls as Fed hikes return

Risk appetites increased overnight with very strong results on European markets and Wall Street, both pushing 2-3% in single session gains. The bond market saw another easing in yields as the 10 year Treasury yield headed towards the 1.5% level while currency markets extended their reversal in USD strength but only in risk currencies like the Aussie dollar as the Euro remained flat. Commodity markets continued their rebound as well with both Brent and WTI oil up around 3%, copper was flat as gold still struggled to again traction as it fails bounce back above the $1800USD per ounce level.

Bitcoin’s bounceback from its mammoth drop over the weekend is slowly turning into a dead cat bounce with price rolling over before it can gain momentum at the $51K level. The four hourly chart shows an inability to bounce beyond the high moving average with short term resistance clearly building here. The next support levels are far away 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 were the odd market out with the Shanghai Composite pulling back slightly, down 0.1% to remain just below the 3600 point level while the Hang Seng Index has bounced up strongly, finishing nearly 3% higher at 23983 points.  This market really wants to get out of the doldrums with daily momentum heavily reversing after being well oversold with upside price action engaging strongly. This potential swing play above the 23800 point level is just a reaction to being so oversold but price action overall remains in a long term downtrend channel with heavy resistance overhead at the 24500 point level:

Japanese markets are doing a lot better with the Nikkei 225 closing nearly 2% higher at 28455 points.  Futures  are indicating a continued push higher today in line with other risk markets, although Yen didn’t continue itself own weakening trend overnight. Price had been bunching up at the September support levels just above 27000 points, with momentum swinging back from a very oversold condition as the potential for this move to continue up towards former support, now resistance at the 29000 point level:

Australian stocks didn’t escape the party with the ASX200 lifting 1% to close at 7313 points. SPI futures are up nearly 0.4% or over 30 points alongside other risk markets should bolster the potential for a Santa rally as we head into the final trading weeks of the year.  The lack of a new daily high since the late November slump had been weighing on sentiment here so a breakout is long overdue but is likely to find heavy resistance at the previous highs around the 7400 point level:

European markets continued their very solid start to the trading week with more stonking increases across the continent, this time the German DAX finishing 2.8% higher at 15813 points. The daily chart had also been showing price action bunching up at the September lows as daily momentum pushed into extremely oversold levels, so this violent swing higher helped along by a much lower Euro is not surprising. The over-reaction to Omicron is definitely helping some Christmas bonuses for traders across the world!

Wall Street extended its ebullient mood overnight with the NASDAQ up 3% while the S&P500 lifted 2% to solidly push through the 4600 point level, closing at 4686 points. The four hourly chart shows price action continuing its breakout above the week plus long downtrend, also clearing trailing ATR resistance at the 4630 point level as it too sets up to wipe out the Omicron dippity do:

Currency market volatility remains a little stretched, as tension between a strong USD vs Euro is offset against rises in risk currencies  Euro maintained its deflation and broke well below the 1.13 handle before a late surge took it back to the tentative support at the 1.1270 ATR level. Momentum is now considerably oversold with price volatility indicating an equal chance of a breakout here above the trend line, but also a new low below the 1.2250 mid level:

The USDJPY pair tried to extend its gains after a pull back in Yen safe haven buying but couldn’t get past the mid 113 level as it came up against short term resistance overhead. While this pair also has the short term potential of  swing higher, the inability to clear overhead resistance at the 114 handle is telling as medium and long term charts continue to weigh against any larger change:

The Australian dollar went right through the 71 handle overnight, almost taking it back to the mid level achieved last week before its recent downturn. Clearing overhead resistance at the 70.80 level confirmed the swing trade higher alongside other risk assets but there is considerable medium term levels of resistance to clear next, so this is likely just a short term bounce:

Oil prices continued to rally alongside European shares as sentiment around Omicron’s impact on demand continues to shift with the Brent marker finishing nearly 3% higher to push through the $75USD level. Short term volatility was pointing to a potential bounceback, and while this may have the legs to get back to the former monthly resistance level at $77, it maybe the extent of the gains as these falls started well before the Omicron scare started:

Gold remains 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. Short term momentum is looking a little more bullish after being neutral as price action continues to suggest 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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