Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The long awaited FOMC meeting and press conference came and went, confirming that a swag of interest rates from the US Federal Reserve is on its way. Equity markets on both sides of the Atlantic were up before the meeting, but Wall Street sold off afterwards, given Fed Chair Powell’s very open comments on how far the rate hikes could be, with the USD strongly firming against all undollars. This included gold which had been resilient leading up to the meeting and through the recent correction, falling back to the $1820USD per ounce level while oil and other commodity markets went higher, Brent and WTI crude oil lifting 2% to near decade highs. The 10 year Treasury yield rose to 1.8% with all futures indicating a March rate hike – possibly a big one – is certain.

Bitcoin was slowly recovering from its big selloff and breached the $38K level but was then smacked down after the Fed press conference, now hovering just above the $36K level. The four hourly chart does not look promising with a classic dead cat bounce pattern suggesting a bigger rollover is imminent:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were able to bounce back with the Shanghai Composite up 0.6% to 3455 points, while the Hang Seng Index eked out a minor gain, closing only 0.2% higher at 24289 points.  The previous breakout above the 24000 point level is still in a holding pattern so caution must reign here while support continues to firm at the 24000 point level. A move to the previous monthly highs near 26000 points is still probably here but wait for momentum readings to go into overbought mode first, with price action getting above the 24600 point level at the high moving average:

Japanese markets continued to pull back with the Nikkei 225 closing 0.4% lower at 27011 points as hesitation continued. Futures remain extremely uncertain here although a downtrend is quite evident from the 29000 point high as momentum readings remain extremely oversold with price action retreating to the 2021 yearly lows:

Australian stocks were closed for StrayaDay with SPI futures are still down more than 0.4% with an open below the 7000 point level likely due to the shaky night on Wall Street. The daily chart is exhibiting a classic deceleration pattern that should form some stability given how extreme momentum is oversold, helped along slightly by a slumping Aussie dollar:

European shares had a major bounceback with 1-2% gains across the continent, the Eurostoxx 50 index finishing 2.1% higher at 4164 points. Notably though futures saw it pull back most of this short covering exercise as Wall Street lacked confidence following the Fed meeting, with stability nowhere to be seen yet although there are some hopeful signs of monthly support forming at the 4000 point level:

Wall Street was up broadly before the FOMC meeting and resulting press conference but then lost all confidence with the NASDAQ putting in a scratch session while the S&P500 finished 0.2% lower at 4349 points. The four hourly chart shows a potential bounceback that just pipped through overhead ATR trailing resistance but failed to make headway, rolling over last night and almost back to the extreme lows. This ain’t over:

Currency markets increased in volatility as the USD re-embiggened against everything overnight, with Euro suffering the most, having been in a major downtrend for over a week prior to the Fed meeting. The union currency fell almost down to the 1.12 handle in a swift move later in the session and is looking to take out multi week support on. Euro pulled back below the 1.13 handle briefly but then had a small bounce back, again failing to make a new session high in the process. The four hourly chart shows this clearly with momentum still negative, although a small swing play is setting up:

The USDJPY pair however built on the support that firmed previously at the mid 113 level and shot up through the 114 handle in a very swift move that almost took at the previous weekly intreasession high, offsetting what was a lot Yen safe haven buying. This should be good for domestic Japanese stocks but maybe too much too far with momentum at overbought levels that could see a retracement back to overhead ATR resistance at the 114.40 level:

The Australian dollar had been under pressure before the Fed meeting and slid over 50 pips in the wake of Powell’s comments, pulling back to the start of week slump at just above the 71 handle as of this morning. This wipes out any fears over the RBA doing anything following the inflation print with the potential for the differential to quickly widen so watch for a further retracement below 71 cents:

After a mild pause last week oil markets are re-engaging to the upside with Brent lifting more than 2% to almost cross above the $90USD per barrel level for another yearly high. Daily price action was suggesting a potential top but this was brushed aside quickly as momentum readings remained in overbought territory with price supported above the previous highs at the highest horizontal black line. The next target is obvious at $100USD per barrel, the support levels that held in 2010-2012 before the recent secular bear market in crude oil:

Gold was proving remarkably resilient in the wake of risk and bond market selloffs and runs to USD as but this was wiped out in one fell swoop due to the US FOMC meeting, with the shiny metal pushed down to below the $1820USD per ounce level overnight, just after making a new daily high. This takes it back to the previous support action of the last couple of weeks that kept it above $1800 which must hold going into the March meeting:

 

 

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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