Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street hiccuped overnight following the big bang inflation print with tech stocks dragging the whole edifice down, with the NASDAQ losing 2.5% on the back of multiple Fed officials mentioning that sharp interest rate hikes are coming sooner than expected. The initial jobless claims print came in higher than expected, while the bond market firmed again as risk currencies consolidated their breakouts against USD. Gold almost dipped below the key $1800USD per ounce level on the Fed comments but bounced back, while oil prices and other commodities were largely unchanged.

Bitcoin failed to get back above the $44K level following the start of week swing higher after finding a potential bottom at the $40K level, but rolled over last night down to the $42K level, unable to take out short term resistance on the four hourly chart. This move up towards former support now major resistance at the $46K level just doesn’t have the internal buying support to get going:

Looking at share markets in Asia from yesterday’s session where mainland Chinese shares pulled back sharply going into the close with the Shanghai Composite finishing more than 1% lower to 3555 points while the Hang Seng Index had a pause after its recent surge, treading water at 24429 points. This substantial break above the 24000 point level may be a case of too far, too fast with a consolidation likely here to end the week, but trailing ATR resistance has been taken out and price is almost ready to clear the previous support/resistance line from early November last year:

Japanese markets however sold off in response to Yen appreciation following the US inflation print with the Nikkei 225 closing nearly 1% lower at 28489 points. Price action had 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 another 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 best performers in the region with the ASX200 closing 0.4% higher at 7474 points. SPI futures are down at least 0.5% given the falls on Wall Street overnight, so this is likely to be taken back and then some as traders are still worried about the still on holidays RBA and its response to the US inflation print. The daily chart continues to look volatile here even with support building below at the 7250 point zone, short positions are mounting to the upside:

European shares had very mixed sessions across the continent, the German DAX closing only a few points higher to remain above the 16000 point level, while the Eurostoxx 50 index finished dead flat before post-close futures saw it retreat below the 4300 point level. The daily chart shows the potential for a rollover building, with the stronger Euro and wobbly Wall Street moves pushing price down to support at the 4200 point area with the inability to clear the daily downtrend line at the 4350 point level:

Wall Street caught a cold from the Fed inflationistas with the NASDAQ leading the way, down over 2.5% while consumer stocks dragged the S&P500 down some 1.4% to close at 4659 points, unable to maintain price above the 4700 point level or the session highs from late last week (solid black horizontal line). As I said yesterday, it seemed momentum was not enough to clear concerns about the Fed’s rapid response to inflation and here we are with a rollover to potentially take it through the key 4600 point level unless the BTFD/PPT crowd comes through yet again:

Currency markets remain solidly against the USD with the Euro maintaining its breakout position well above the 1.14 handle although intrasession it came up against some resistance at the 1.1480 level. This keeps it way past last week’s highs and sets it on trend to the 1.16 level that broke in October last year but as I warned yesterday, this move is way overdone with momentum readings nearly off the charts so expect a pullback here to the low 1.14 levels:

The USDJPY pair continues to fall flat on its face in the wake of the inflation print with more selling overnight taking it towards the 114 handle and a new monthly low. This will continued to provide 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 was able to take some heat out of its breakout overnight, pulling back below the 73 handle but maintaining its new weekly high position. Momentum readings were nearly off the charts so my expectation of a pullback has come to pass but watch for intrasession support at the 72.70 to the mid 72 level that is likely to hold here:

Oil markets were relatively calm overnight with Brent crude pulling back slightly, closing just below the $84USD level overnight, still 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 is struggling to get back to its former highs after clearing the key $1800USD per ounce level in previous sessions with last night seeing a violent swing down to that level on inflation comments from Fed officials before bouncing back. However, the bounceback did not match the previous session highs which are obviously showing a lot of resistance here on the four hourly chart with an inability to clear the $1830 level which is worrisome. Watch out of another potential “unexpected” rollover to materialise:



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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