Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The big bang shocked risk markets overnight with one of the biggest inflation prints in decades in the US sending the USD down – yes, down – against almost everything – with stocks tentatively moving higher. The Fed has a lot of catch-up to do although the bond market was benign in the wake of the print, with 10 year Treasuries remaining firm below the 1.8% level as risk currencies broke-out significantly higher against USD. Gold had a more moderate move but continues to build above the key $1800USD per ounce level while oil prices and other commodities advanced again in the wake of the weaker USD.

Bitcoin continued its mild swing higher overnight after finding a potential bottom at the $40K level, now pushing through to the $44K level, taking out short term resistance on the four hourly chart. While there’s still daylight below to the next major support levels at $30K, this could be the start of a new bounceback up towards former support now major resistance at the $46K level:

Looking at share markets in Asia from yesterday’s session where mainland Chinese shares lifted swiftly into the close with the Shanghai Composite finishing up 0.8% to 3598 points while the Hang Seng Index put in a substantial surge to close nearly 3% higher, crossing well above the 24000 point level, closing at 24402 points. I called for a substantial break above the 24000 point level to get things moving and here we are with nominal trailing ATR resistance taken out and price almost ready to clear the previous support/resistance line from early November last year:

Japanese markets also put in a strong surge despite worrying signs of Yen appreciation with the Nikkei 225 closing 1.8% higher at 28765 points. Price action has been trying to push through overhead resistance at the 29000 point level previously but the stronger Yen continues to dominate, with volatility on Wall Street not helping at all here. Futures are indicating a possible pullback on the open on the back of the much higher Yen, as daily momentum remains negative as we potentially head back to the December point of control at the 28000 point level:

Australian stocks were the relative poor performers with the ASX200 eventually closing 0.6% higher to the 7438 point level. SPI futures are showing a flat start is likely given the big appreciation in the Australian dollar overnight, despite the positive result on Wall Street. Traders will be worrying about the still on holidays RBA and its response to the US inflation print as the daily chart continues to look volatile here even with support building below at the 7250 point zone, concerns are mounting:

European shares had moderate upticks across the continent, the German DAX closing 0.4% higher to get back above the 16000 point level, while the Eurostoxx 50 index finished 0.8% higher to breach the 4300 point level. The daily chart shows the potential for rollover building, despite the overnight gains because a stronger Euro may dominate risk taking, but it appears that support at the 4200 point area is remaining firm so watch for price to tackle that daily downtrend line next at the 4350 point level:

Despite the inflation print and the tsunami of interest rate rises that will follow, Wall Street saw a positive finish with the NASDAQ up 0.2% alongside the S&P500 which closed at 4726 points, maintaining price above the 4700 point level. Price remains above the session highs from late last week (solid black horizontal line) but it may not be enough to clear concerns about the Fed’s rapid response to inflation. Momentum is still signalling this as a swing trade only, but the BTFD crowd could come through here:

Currency markets went ga-ga over the US inflation print with the USD sold off sharply against everything undollar-ish. The once beleaguered Euro broke out in a swift move up through the 1.14 handle after building at the mid 1.13 level post the Powell comments earlier. This takes its way past last week’s highs and sets it on trend to the 1.16 level that broke in October last year. This move is way overdone with momentum readings nearly off the charts so expect a pullback here as traders digest the massive inflationary moves afoot:

The USDJPY pair fell flat on its face in the wake of the inflation print with a near 100 pip drubbing taking it back to the mid 114 level and a new monthly low. This will prove a very tough headwind for Japanese stocks at least, as it unwinds the five year high in the pair but still provides some more daylight potential below to monthly support at the 112-113 zone:

The Australian dollar soared higher like everything else, making a new weekly high and high for the year so far, almost getting above the 73 handle as commodity prices also soared overnight. The Pacific Peso was under a lot of pressure before this move with a release seeing it take out the 72 handle after recently making a three week low, but this is something else as markets try to work out what’s going to happen next by the Fed. Momentum readings are nearly off the charts so I would normally expect a slight pullback here to the mid 72 level but this may have more legs yet:

Oil prices were already on a roll before the inflation print and continued to push higher with Brent crude surging past the $84USD level overnight, not far away from the October highs. Daily momentum is well into overbought territory now as the fill in to reach the October highs is almost complete but watch for too much heat in this market that could escape violently:

Gold also is trying to get back to its former highs after clearing the key $1800USD per ounce level in previous sessions with last night’s move a relatively mild one that almost took it back to the December highs. I said yesterday we could see a small consolidation move first and here it is with the four hourly chart showing nicely overbought momentum but not enough to punch through the $1830 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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  1. Camden HavenMEMBER

    Great work Chris. But what to make of it?
    My gut is saying that it is just a dose of volatility.