Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk markets swiftly bounced back last night as they hinged on reports about vaccine efficacy against Omicron, plus the lower hospitalisation rates seen – combined with some strong earnings data and very low liquidity on oversold stocks. Wall Street bounced the hardest, pulled along by a frenzy of buying in tech stocks while currency market volatility reduced again as risk currencies lifted higher and safe haven buying abated including in gold which continues to deflate well below the $1800USD per ounce level. Commodity markets finally saw some relief with oil prices up nearly 4%

Bitcoin is also back with a bounce up to the mid week high from last week just below the $49K level, where it nominally took out trailing ATR resistance but hasn’t made it stick this morning as short term momentum didn’t cross into the overbought zone. Price action is still setting lower highs so don’t get too excited just yet as the technical picture still remains grim for crypto with the next support levels are 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 started the bounceback, with the Shanghai Composite up nearly 0.9% to 3625 points while the Hang Seng Index was also on the rise, up 1% to 22971 points. This keeps price around the 23000 point level where multi-month support lives, but remaining here at the 2020 lows (lower black line) has the potential to start a new bear market:

Japanese markets also moved sharply higher with the Nikkei 225 taking back its previous losses to be up over 2% to 28517 points. Price action had broken below the nascent uptrend line from the start of the month, but this could see price get back to overhead resistance at the 29000 point level that has failed to clear in recent weeks. Momentum remains negative on the daily charts so be wary of a potential bull trap that could see price revert back to the 27000 point proper soon:

Australian stocks were steady at the start of the session before slowly rising for the remainder of the day, with the ASX200 closing 0.8% higher at 7355 points. SPI futures are up slightly so we could see a push up towards resistance again at the 7400 point level, but it maybe too late for a Santa rally as the market seems anchored more near the November lows. The technical setup is almost ready for a proper swing play though:

European markets all bounced back in unison with almost identical finishes higher with the FTSE and the German DAX up 1.4%, the latter at 15447 points. Intrasession volatility was very high here in the previous session and pointed to this bounceback, given the large amount of late buying to keep price above the 15000 point level. While the latest German consumer confidence print came in lower than expected, there is still some support bouncing around here (sic) to keep the market off the rails until the new year, although momentum is decidedly negative:

Wall Street engaged the BTFD team as expected with the NASDAQ leading the way, up over 2.4% while the S&P500 gained exactly 1.5% closing at 4637 points. The four hourly chart showed the way with that last candle in the previous session bouncing off the 4540 point area but its not yet over with price still below trailing ATR resistance and not above the previous point of control at the 4600 point level:

Currency market volatility is reducing but there’s still potential lurking as equity markets bounceback with the Euro continuing its reversion to the mean trade heading it back towards the 1.13 handle. The four hourly chart shows price getting back above the previous ATR support at the mid 1.12 level that had nominally held the last few weeks, with momentum getting back to more neutral settings, but this pair is still looking weak at best with a sideways bent still evident amid the volatility:

The USDJPY pair showed much more life as safe haven buying was abandoned in Yen, pushing the pair straight through to the 114 level in a big lift overnight despite the interesting comments coming out of the BOJ. The four hourly chart is looking more promising again with the previous point of control losing grip as price again tackles resistance at the 114 handle, as a new weekly low has not yet been made, momentum switching to slightly overbought:

The Australian dollar had a mild lift higher too on stronger commodity prices, bouncing off recent support at the 71 handle to finish this morning at the mid 71 level, absorbing the recent RBA minutes without fuss. I still contend that the failure to breakout after clearing the previous weekly highs continues to spell more downside volatility for the Pacific Peso, where I’m watching support at the 71 level that must hold, but this could swing up to the 72 level on sentiment again in the short term:

Oil prices remain volatile alongside European equities in particular but the bounce is in with Brent crude lifting nearly 4% to get back above the $74USD level overnight. Is this still a dead cat bounce? Well until momentum gets off the floor and price makes a new high above the high moving average band on the daily chart, this downtrend is not yet over as price gravitates towards the psychologically important $70 level:

Gold continues to disappoint with a continued slide below the $1800USD per ounce level, failing to provide a counter to the other safe havens, closing at the $1788 level overnight. While price is just above or around the previous weekly highs and still above short term trailing ATR support, its still in a downtrend with sentiment unable to push the shiny metal higher. I’m continuing to  watch for potential support to come up shortly here at the recent weekly highs:

 

 

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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