Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Last night saw a volatile start to the trading week for North Atlantic markets after Chinese markets sold off sharply in response to inflation and COVID concerns, while the former lost their confidence on recession concerns over more rate rises. The USD rose to a two year high with the Australian dollar continuing on its post RBA downward path, while Euro was wobbly and Yen is about to break its 2014 low. Interest rate and bond markets are still firming many more rate rises on the way, with the 10 year Treasury almost lifting through the 2.8% yield level while commodities saw big drops. Oil prices came off at least 4% with Brent now below the $100USD per barrel while gold continued its breakout above the $1950USD per ounce level.

Bitcoin sold off sharply overnight, breaking through the the $40K level after breaching daily ATR support on Friday. This lack of confidence in crypto could see a further retracement down to the February lows at the $37K level next:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets were unsettled given the ongoing COVID domestic problems, with the Shanghai Composite closing 2.6% lower to 3167 points while the Hang Seng Index slumped 3.1% to 21208 points.  The daily chart of the Hang Seng Index was indicating a potential breakout but the attempt to clear very strong resistance at the 22600 point level has failed with momentum pushing the market lower with a break below the low moving average next:

Japanese stock markets are also very unsteady with the Nikkei 225 closing some 0.6% lower to 26821 points. Futures are indicating some further selling on the open despite a hugely weaker Yen as daily momentum reverts sharply from its slightly overbought status. Price has definitively rolled over back to weekly resistance at the 27500 point level and may begin to fall below the previous February highs, with that low moving average now broken, with support at 26400 points the next target here:

Australian stocks again were the outperformers in the region but that’s not saying much with the ASX200 closing just 0.1% higher to remain shy of the 7500 point level. SPI futures are down nearly 0.4% despite the bigger falls on Wall Street overnight. The daily chart was showing a lot of potential with daily momentum still quite strong but price is still finding stiff resistance at the former highs from December last year:

European shares took back about half their Friday night gains as the Eurostoxx 50 index finished nearly 0.5% lower at 3839 points. I still contend we could be seeing a capitulation here as price remains well below the trendline and the low moving average, finding substantial resistance overhead as momentum remains neutral and not yet negative:

Wall Street again was much more volatile with the NASDAQ losing over 2% while the S&P500 eventually finished more than 1.4% to lower to close at 4412 points. Price action on the four hourly chart is showing more step down action here from the previous weekly highs with the break below previous support at the 4500 point level now turning into a proper correction:

Currency markets continued to see a slightly stronger USD although only small gains were made with Euro still oscillating around a point of control at the 1.09 handle after absorbing the recent ECB minutes. The union currency is still below the 1.09 handle proper, with the now two week long reversal keeping it line with its longer term downtrend, although short term momentum is no longer oversold:

The USDJPY pair continued its uptrend, bursting through new highs overnight after breaking through the 124 level on Friday night as this weekly uptrend turns into a blowout. This sees price action taken to near decade highs that is unsustainable in the short term as Yen is dumped everywhere. Watch for momentum to revert here from extremely overbought levels:

The Australian dollar is still continuing its post RBA euphoria reversal, unable to find any buyers as it breaks down to the 74 handle overnight on the back of lower commodity prices. I still contend this drop could be shortlived with more upside potential building as commodity prices are likely to rebound in the wake of more Russian sanctions, but price has now broken below weekly support which does not bode well:

Oil markets turned Friday’s pause into a selloff with Brent finally getting back below the $100USD per barrel level, after breaking support at $103 earlier last week. As I’ve contended for a while now, the charts of oil leading up to and through this conflict are classic technical bubbles with the second peak lower than the first. This could turn into a wider rout so watch for nascent support at the last drawback level at just above $95 that must be defended here or the bubble will pop:

Gold is trying to find more support after its breakout move on Friday night, this time lifting up through the $1950USD per ounce level but only in modest fashion. Price was maintaining itself above the psychologically important $1900USD per ounce level, but momentum is not yet overbought. The next stage is a follow through above the recent false breakout around the $1960 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!wrong on your position, so cry uncle and get out!

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