Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The good times continued on overnight stock markets although tech stocks on Wall Street had a stumble with profit taking on big numbers like Tesla and Apple despite a very solid manufacturing PMI print for December. Currency markets continued to recover from a period of low volume, nearly back to normal with USD hitting a five year peak against Yen, which should help risk spirits here locally in Asia. Meanwhile, gold regained some strength to extend past the $1800USD per ounce level while other commodities saw some solid bids with Brent and WTI crude up on OPEC+ sticking to their February increases.

Bitcoin continues to deflate as it barrels down to the previous daily lows at the $46K level, unable to gain any traction at all here with no buyers (or rampers or movers and shakers) evident. This is not looking good as we head into a new year, watch that support line to come under pressure soon:

Looking at share markets in Asia where mainland Chinese shares were down a little with the Shanghai Composite off by 0.2% to 3632 points while the Hang Seng Index was barely changed at 23289 points.  This keeps price anchored at the 23000 point level where multi-month support lived previously, just off the 2020 lows (lower black line) which has the potential to start a new bear market if it doesn’t make a substantial new daily high soon above the high moving average line:

Japanese markets though put in strong returns on the back of a weaker Yen with the Nikkei 225 closing 1.7% higher at 29301 points. Price action is pushing through overhead resistance at the 29000 point level with momentum now picking up strongly with a much weaker Yen overnight providing a solid tail wind to get this market back to the 30000 point level:

Australian stocks also had a much better start to the new year than anticipated, with the ASX200 closing nearly 2% higher at 7589 points. SPI futures are down 0.2% or so given the wobble on Wall Street overnight. The daily chart shows a big breakout here above the 7500 point level that could extend into further gains as momentum gets nicely overbought:

European shares extended their all-time highs from Monday, continuing the upbeat mood with the German DAX up 0.8% to extend its move above the 16000 point level, closing at 16152 points. Price action is lifting strongly with highly overbought momentum ready to engage the new year and try to get back to the 2021 highs:

The good mood on Wall Street however was split in twain by a fall in tech stocks with the NASDAQ giving back its Monday gains, down 1.3% while the S&P500 went nowhere to finish at 4793 points. The four hourly chart shows the Xmas breakout ready to re-engage to the upside with momentum ready to push through the 4800 point level, but this is looking a bit tight here so watch for any further challenges of support at the 4750 point level for a potential dip going into Friday’s NFP:

Currency markets reflected a strong USD which continue to lift against the major currencies overnight with Euro pushed lower again after a unsteady start to the trading year. The union currency retreated well below the 1.13 level overnight, keeping price contained within the bearish rising flag pattern more evident on the daily chart. The four hourly chart below shows a potential break below the lower level as we go into the NFP print on Friday:

The USDJPY pair is shooting higher and higher, breaking out above the 116 handle overnight to a new five year high in a one way trade that is getting well overextended. The four hourly chart shows momentum reading extremely overbought and ready to revert back to mean despite the one way nature of the trade. There’s no stopping this now, but I’m watching for a potential reversion to four hourly ATR trailing support the the mid 115 level to take some heat out of this pair:

The Australian dollar is making a comeback despite a variety of forecast revisions into the new year with a surge back above the 72 handle overnight to try to get it back on its pre Xmas trend. This has all the style of a short term swing trade only so far, with the potential to peter out around trailing ATR resistance at the mid 72 level as momentum remains neutral. However, the surge in commodity prices especially iron ore could provide some more upside here:

Oil price volatility is building again in the wake of the OPEC+ decision with Brent crude lifting more than 1% to almost close above the $80USD level overnight. After clearing its previous weekly highs the daily chart is showing a breakout building here that has the potential to get things moving back to the $85 level very quickly, as daily momentum moves into positive territory, but is it enough to weigh against COVID demand concerns in Europe?

Gold is back on track after a surprising fall from the $1830USD per ounce level post Xmas, bouncing off support at the $1800USD per ounce level overnight after stabilising at the lower edge of its trend line. The daily chart shows a potential clearance of overhead trailing ATR resistance at the $1820 level but the lack of truly overbought momentum is showing this move to not be fully supported so watch for a potential fall back below 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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