Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Stock markets in the US and in Europe fell overnight with bond markets seeing a surge in yields as central bank interest rate rises certainties swamp risk taking. The US Treasury 10 year yield rose to 1.86%, a new two year high with shorter term yields also spiking. This sent the USD higher against almost everything, although gold remained somewhat resilient as risk currencies fell sharply against King Dollar. Oil prices rose again for another multi-year high on concerns over a possible Russian invasion of Ukraine upsetting energy around the continent.

Bitcoin continues to struggle to make headway as it remains anchored near the $42K level, possibly on its way to a potential bottom at the $40K level. Last night saw it dip below ATR support on the four hourly chart with a series of lower highs confirming a new short term downtrend that could easily turn into a breakdown here as momentum gets into oversold mode:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were the odd ones out as they headed higher on the expectation of more rate cuts from the PBOC with the Shanghai Composite up 0.8% to 3569 points. Meanwhile the Hang Seng Index slipped again, losing 0.4% to 24112 points. The break above the 24000 point level is sticking so far, but has not made any further advancements, so this small consolidation phase has to turn around soon with new daily highs or it will prove a false breakout and a return to the 23000 point levels will transpire:

Japanese markets are not being helped by a weaker Yen with the Nikkei 225 closing 0.3% lower at 28257 points. Price action is being contained here at short term resistance below the 29000 point level as Yen weakness is being overshadowed by overall dampening of risk taking in stocks as Wall Street inverts. Yesterday’s BOJ meeting did not provide a catalyst to get away from the December point of control at the 28000 point level, with futures indicating a poor start on the open:

Australian stocks also wentg nowhere, with the ASX200 down just 0.1% to close slightly above the 7400 point level at 7409 points. SPI futures are down more than 1% on the slump on Wall Street, with support likely to be tested here at the 7250 point zone, as this sideways move since October last year keeps most traders twiddling their thumbs:

European shares have had their solid starts to the trading week taken back and then some with the German DAX losing 1% alongside everything else, the Eurostoxx 50 index finishing the same 1% lower at 4257 points, taking out short term support at the 4300 point level. The daily chart is showing the potential for a rollover building, as the weaker Euro is not providing any help in stabilising price action at the 4200 point area where its ready to break:

Wall Street fell out of bed after the long weekend and hit the floor, with the NASDAQ off more than 2.5% while the S&P500 lost more than 1.8% to fall well below the 4600 point level, closing at 4577 points. This takes it back to the December lows, wiping out all nominal gains for the year as firm support at the 4600 point level is taken out. There is some deceleration in price evident here though but the BTFD team has to step in soon or this could continue until we get the first official Fed interest rate rise next month:

Currency markets are picking up in volatility as the bond market selloffs and sends USD higher against almost everything, not helped with concerns over Russia’s potential invasion of Ukraine. The Euro sold off swiftly overnight, after hovering at the 1.14 handle to almost make a new weekly low after the minor pullback didn’t succeed in setting up a new leg higher. With short term support taken out the next target below is weekly support at the 1.13 level:

The USDJPY pair was able to stabilise somewhat here, with Yen safe haven buying offsetting the run to the USD. Price still hasn’t cleared overhead ATR resistance with this swing trade back to trailing overhead ATR resistance not likely to have legs with momentum remaining neutral, so watch for a potential further run below the 114.40 level if the risk off move accelerates:

The Australian dollar moved lower despite an uptick in commodity prices overnight, with price pushed below the 72 handle after taking away the previous attempt to make a new weekly high position. Momentum readings are moving into oversold readings with last week’s intrasession low slowly approaching as internal buying support for the Pacific Peso wavers. I’m watching the the 71.50 level to come under threat next:

Oil markets are still loving this ride, with futures lifting again as energy prices remain volatile in the wake of a potential European conflict, with Brent up strongly to build on its new yearly highs to push above the $88USD level overnight. Daily momentum is well into overbought territory and with the new highs taken out there’s potential for a move up to $90 next:

Gold is still struggling to get back to its former highs after clearing the key $1800USD per ounce level in previous sessions with buying pressure in USD sending it below the $1820USD an ounce level again. The previous session highs are obviously still 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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