Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Following the release of the Fed minutes in the previous session, indicating a much more hawkish bent as markets get ready for tonights US unemployment print, it was a case of wait and see on Wall Street overnight, although the bond market continued to weaken as interest rates rises firm throughout the calendar year ahead. Risk currencies saw continued weakness against USD while gold finally broke below the key $1800USD per ounce level. Oil prices however remained buoyant and on an upward path due to OPEC+ certainty with another 1% rise across the complex.

Bitcoin broke below its previous daily lows at the $46K level, pushing down nearly 10% to the $42K level quite swiftly, eventually finding a potential but weak bottom overnight. There’s still daylight below to the next support levels at $30K, but minor support at the September 2021 lows at $40K could also be another battle area that may hold:

Looking at share markets in Asia where mainland Chinese shares were down slightly with the Shanghai Composite down 0.25% to 3586 points while the Hang Seng Index was down initially but had a late spurt, gaining more than 0.7% to just get back above the 23000 point level, closing at 23072 points. Price remains anchored here at the 23000 point level where multi-month support lived previously, with some signs of support building but if it breaks through the 2020 lows (lower black line) this has the potential to start a new bear market:

Japanese markets did not like the Taper with the Nikkei 225 closing more than 2% lower at 28559 points despite the still elevated USDJPY pair. Price action had tried to push through overhead resistance at the 29000 point level with momentum picking up strongly but correlation with other risk markets is behind this pullback below the 29000 point level. Watch for any means of support building below because the Yen remains weak against USD and is likely to fall further after tonight’s strong NFP print:

Australian stocks had the worst selloff, not helped with local machinations over COVID, with the ASX200 closing 2.7% lower at 7358 points. Surprisingly, SPI futures are up at least 1% despite the anemic effort on Wall Street overnight as the daily chart looks busy at best, chaotic at worst with this false breakout above the 7500 point level possibly turning into a (sic) turning point if its not adequately defended in the last session of the week:

European shares finally caught up to the poor risk mood with falls across the continent with the German DAX closing 1.3% lower to be just above the 16000 point level, closing at 16052 points, but it pulled most of this back in futures due to the later falls on Wall Street. Price action had previously tried to get back to the November highs but the recent daily candle clearly showed an inability to punch through despite some strong and highly overbought momentum. This reversion trade here could continue down to the low moving average and turn into a swing trade so watch below:

Wall Street tried to catch its breath in the wake of the selloff in tech stocks that caused this dip with the NASDAQ eventually closing only 0.1% lower, alongside the S&P500 which couldn’t make headway, finishing just below the 4700 point level. The four hourly chart shows this breakdown now finding some support at or around that level but there is no clear support and resistance lines being formed in the short term as volatility remains high going into tonight’s NFP print which could spell doom for stocks:

Currency markets continue to reflect a strong USD post the Fed minutes release with consolidation against the major currencies overnight as Euro was contained well below the 1.13 handle. The union currency looks like retreating back to the lower edge of the bearish rising flag pattern that’s quite evident on the daily chart with the four hourly chart below shows a potential follow through to the start of week levels around 1.1270 before the NFP print tonight:

The USDJPY pair continues to find support with a lack of Yen buyers although it failed to get back above the 116 handle as it takes some heat out of the big surge earlier in the week that created a new five year high. There is a small downtrend line caused by a series of lower highs that needs to be broken through to re-engage this trend, so watch for the 116 handle to come under pressure tonight on the unemployment print:

The Australian dollar however continued its sharp retracement below the 72 handle overnight, taking it a new three week low and wiping out the Santa rally. Despite strong moves in commodity prices, particularly iron ore, not much support is being provided here so with tonights NFP print we could see a much stronger rout that takes the Pacific Peso down to the 71 handle or lower:

Oil price volatility is building up yet again as traders embrace the certainty around the OPEC+ decisions with Brent crude lifting more than 1% to almost close above the $82USD 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:

Gold was back on track after a surprising fall from the $1830USD per ounce level post Xmas, but the failure to make a new daily high and find any support post the hawkish Fed minutes has seen a big selloff overnight. Price action has slumped through the $1800 level to take it back to the December 2021 lows and through the lower edge of the trend channel, spelling the end of this reflation stage:

 

 

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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