Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk markets are getting unsettled again in anticipation of more Omicron news but also the German and US inflation prints later tonight with Wall Street pulling back from its bounceback rally.  The bond market is firming, with the 10 year Treasury yield pulling back below the 1.5% level while the USD is regaining strength against Euro and other risk currencies. Commodity markets are also consolidating with oil prices pulling back 1% while copper fell 1.5% and gold is going nowhere, falling another 0.5% to make a new weekly low.

Bitcoin continues to deflate alongside other crypto’s with a move below the $48K level overnight as momentum gets into oversold mode and all buying support evaporates. The four hourly chart shows a return to the start of week gap low after failing to put in a proper bounceback with the next support levels quite 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 liked the inflation print with the Shanghai Composite closing nearly 1% higher at 3673 points while the Hang Seng Index has put in a similar session to get back on track, also up 1% at 24254 points. This market really wants to get moving but this is still a dead cat bounce until daily momentum switches to a heavily positive setting, with this move just a reaction to being so oversold as price action overall remains in a long term downtrend channel with heavy resistance overhead at the 24500 point level:

Japanese markets are in a sideways funk after failing to continue a bounceback with the Nikkei 225 closing 0.4% lower at 28725 points. Futures are indicating another pullback to finish the trading week as the lack of a lower Yen may prove too much for this relatively weak market to push through. While there is some potential for this move to continue up towards former support, now resistance at the 29000 point level, daily momentum is not even positive yet, let alone overbought, so remain cautious:

Australian stocks followed the Japanese lead, with the ASX200 retracing just under 0.3% to be back below the 7400 point level. SPI futures are down about 10 points with heavy resistance at the previous highs around the 7400 point level and the still strong Aussie dollar weighing on sentiment:

European markets continued their stallout with more minor pullbacks across the continent, with the German DAX finishing 0.3% lower at 15639 points. This minor pullback is taking a bit more wind out of the sails of a too strong move higher, although notably, daily momentum has not yet crossed the positive setting, nor has price closed out above the trailing ATR resistance level. Tonight’s German inflation rate could be telling, with another close above the 15700 point level required to keep this bounce alive:

Wall Street couldn’t continue the party despite the strong weekly jobless claims print with the NASDAQ taking back all of its recent gains and then some, slumping 1.7% while the S&P500 fell back 0.7% to break back below the 4700 point level, closing at 4667 points. The four hourly chart shows price action was bunching up at that key level but failed to push through as the strong USD weighed on sentiment. Tonight’s inflation print could prove an important catalyst so watch for a further close below this level:

Currency market volatility is pulling back slightly as USD flexes its strength again with risk currencies easing off the throttle. Euro however sharply pulled back from its recent surge after it got way ahead of itself with momentum ending up being considerably overbought. I expected some consolidation in the short term and this retracement below the 1.13 handle to what has been a neutral support level for several weeks provides no real clue to short term direction:

The USDJPY pair remains in its neutral state after failing to extend its gains from earlier in the week, holding on just above the mid 113 level as it continues to come up against strong 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 eased off its bounceback rally overnight in the wake of the stronger USD and a slight pullback in commodity prices, retracing to the mid 71 level. This takes the Aussie back below the previous weekly intrasession high so my contention of this being short lived was yet prove right although short term momentum remains positive and the low moving average on the four hourly chart is not yet broken through:

Oil prices pulled back slightly, taking some hit out of their recent rally with the Brent marker finishing 1% lower to close right on the $74USD level. I warned yesterday that this move may have the legs to get back to the former monthly resistance level at $77, but daily momentum was not yet positive with a lot of upside resistance to get through, so this is likely to turn into a dead cat bounce and then some consolidation around the psychologically important $70 level:

Gold is still depressed as it failed to build above relatively weak support at the $1780USD per ounce level, breaking down to make a new intrasession low for the week at the $1775 level overnight. Short term momentum was looking a little more bullish but the failure to punch through overhead resistance or create a new significant daily high means the $1800 level will now remain out of reach for sometime:



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!

Latest posts by Chris Becker (see all)