Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A bifurcation in risk taking overnight as Wall Street rallied while European markets were more sanguine, with the new reporting season helping stateside. All eyes remain on the Fed, with the 10 year US Treasury yield making another new nearly four year high above the 2.9% level. The USD rose again with Yen dominating as it is dumped wholesale around the world, while the Australian dollar remains under the pump despite the recent lift in commodity prices. Oil prices however suffered some profit taking with both markers losing nearly 5%, with Brent crude back below the $110USD per barrel while gold suffered the same fate after recently touching the $2000USD per ounce level, selling off sharply below the $1950 level instead.

Bitcoin remains in somewhat of a depressed state, having sold off last week to be anchored around the $40K level after breaching daily ATR support at the $42K level in late March with a lot of oscillation recently seeing it pip back above the $41K level overnight. The lack of confidence in the crypto world could see a further retracement down to the February lows at the $37K level next if the daily high moving average is not breached soon:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets remain unsettled, with the Shanghai Composite scraping in with a scratch session to close at 3194 points while the Hang Seng Index has slumped again, falling more than 2% to finish at 20987 points. The daily chart remains stuck below very strong resistance at the 22600 point level with momentum pushing the market ever lower with continued moves below the low moving average likely as momentum switches from neutral to negative here:

Japanese stock markets however are bouncing higher, lifted by a very weak Yen with the Nikkei 225 closing 0.6% higher at 26985 points with futures indicating a mild bounce on the open as the ever weaker Yen provides a strong buffer. Daily momentum is still at a neutral level with price not yet retreating below daily ATR support but its still rejecting weekly resistance at the 27500 point level. Watch for a potential break above the high moving average soon:

Australian stocks were able to put in a good jumpstart to the truncated trading week with the ASX200 closing 0.5% higher at 7565 points as SPI futures are up at least 50 points or another 0.6% to keep the pre-election euphoria rolling along. The daily chart continues to show a lot of potential with daily momentum still quite strong with price now seeming to push aside resistance at the former highs from December last year – watch for a good close today to clarify a new uptrend:

European shares continue to go nearly nowhere, despite a late charge on Wall Street with the Eurostoxx 50 index finishing 0.5% lower, taking back the previous gains to close at 3830 points, with French stocks the main culprit for the falls. Support has held around the 3700 point area but trading sessions are so tight and muted – even with the Easter break – I would contend there is some big volatility brewing soon, so watch for a potential breakout or breakdown at the obvious levels of support and resistance:

Wall Street remains volatile and proved so again, this time properly breaking out as the NASDAQ jumped more than 2% while the S&P500 lifted 1.5% to close above the 4400 point level at 4462 points. Price action on the four hourly chart is continuing to show a series of steps down as the BTFD crowd try to step in and shore up support and short term price action is not yet indicative that the buying is enough with ATR resistance overhead still not cleared and four hourly momentum not yet overbought:

Currency markets continue to see a stronger USD with Euro rolling back below the 1.08 level after a failed oscillation to get back above a price of control since the start of the week. This keeps price action in line with its longer term downtrend, as short term momentum remains oversold and trailing ATR resistance continues to ratchet down – parity may well be on the radar:

The USDJPY pair is literally on one of the biggest rolls ever, going back more than 40 years with a huge surge again overnight to get through the 129 level, now up over 300 pips since the start of the week! This keeps price action at new decade highs with no stopping apart from the occasional pause as Yen is dumped everywhere. Watch for momentum to potentially revert here from extremely overbought levels, but that trendline looks solid:

The Australian dollar continues to lose its way with a tight trading session that sees its remain below the 74 handle after the release of the latest RBA minutes yesterday. Price has broken below weekly support which does not bode well for any medium term uptrend potential if the RBA raises rates before the election (unlikely), but short term momentum is suggesting a possible swing play is building, so watch overhead ATR trailing resistance for a breakout:

Oil markets sold off sharply later in the session overnight with Brent pulling back below the $110USD per barrel level, finishing around 5% lower at the $107 level. Again, daily momentum is not yet providing enough of an indicator to suggest this blip higher has potential, with a drawback to the key $100 level possible given this bearish candle:

Gold failed to make good on its recent stretch to climb back above the $2000USD per ounce level overnight, instead retracing to the $1950 level instead as profit taking continued. Price action was looking good here for more upside potential having successfully defended the psychologically important $1900USD per ounce level, but as I warned yesterday, daily momentum was not yet overbought. The low moving average must be defended here or we could see a swift return to $1900:

 

 

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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Comments

  1. Hugh PavletichMEMBER

    New Zealand: Self – inflicted general and housing inflation woes … driving the young overseas to avoid politically created and unnecessary mortgage slavery and poverty …

    … In normal affordable markets housing does not exceed 3.0 times annual household income with sensible and responsible mortgage loads about 2.5 times annual household incomes…

    … Google search All Editions … Demographia International Housing Affordability Surveys and 2021 Edition … Demographia United States 188 Markets Housing Affordability Survey …

    High government spending fuelling inflation rate – (Opposition National Party Leader Christopher) Luxon … Radio New Zealand

    https://www.rnz.co.nz/news/political/465554/high-government-spending-fuelling-inflation-rate-luxon

    National Party leader Christopher Luxon says the government is addicted to spending and is making inflation worse.

    Another high quarterly inflation figure – expected to be near the 7 percent mark – is to be released tomorrow.

    Luxon said the government has been blaming international factors for adversely affecting inflation but Singapore is at 2 percent, Australia is at 3.5 and Japan is at 1 percent while dealing with the same challenges.

    With New Zealand at 6 percent heading to 7, the government needs to be focused on reviewing spending, he told Morning Report. …

    … Asked if National would cut a $6 billion allowance the government is poised to spend, Luxon said the government has increased spending by 68 percent since it came to power. … listen and read more via hyperlink above …

    BNZ joins ANZ pushing fixed home loan rates higher as the relentless rise in wholesale rates compresses bank margins faster than some of them are responding. Overnight wholesale rises is keeping the pressure on … David Chaston … Interest Co NZ

    https://www.interest.co.nz/personal-finance/115361/bnz-joins-anz-pushing-fixed-home-loan-rates-higher-relentless-rise

    … Not surprisingly …young Kiwis flee from million dollar housing mortgage debt risks …

    Brain drain: Kiwis heading overseas as living costs rise … TVNZ

    https://www.1news.co.nz/2022/04/18/brain-drain-kiwis-heading-overseas-as-living-costs-rise/

    … access related post …

    https://www.macrobusiness.com.au/2022/04/macro-morning-1285/#comment-4264481

    • Hugh PavletichMEMBER

      UPDATE …New Zealand: Self – inflicted general and housing inflation woes …

      Developers cutting asking prices as housing market slows … Emma Hatton … Radio New Zealand / Stuff New Zealand

      https://www.stuff.co.nz/national/300569518/developers-cutting-asking-prices-as-housing-market-slows

      Property developers are cutting their asking prices by tens of thousands of dollars as they try to entice buyers amid a slowing market.

      They are struggling to get construction supplies on time, secure finance and convince buyers to purchase off the plan.

      Lawyer Joanna Pidgeon from Pidgeon Judd said the market was getting tougher for developers.

      “We are seeing some smaller developers on-sell. They may have bought at a premium but they’re looking to because they can’t get their pre-sales. … read more via hyperlink above …
      .
      .
      … New Zealand has the highest new residential consent / approval rate in the developed world at 9.7 units per 1000 population per annum (check Stats NZ excel file Tables 8 & 9 below). In contrast Australia is about 8.5 (220,000 units last 12 months / 25.8 million population clock) and United States 5.7 (1.9 million units / 332,622,000 population clock). …

      … New Zealand’s housing is the least affordable in the developed world too at about 9.0 times annual household incomes (median multiples) … Australia about 7.0 … the USA about 4.0 times. …

      … New Zealand’s new housing costs are way higher, because it still has the high cost / low productivity horse and buggy cottage industry structure … and has failed to restore a more efficient production industry (e.g. DR Horton USA; Metricon Australia… remember New Zealand’s earlier Group Builders ?) because of inadequate supplies of affordable / near rural priced greenfield land and failed drafting and implementation (unnecessarily complex) of the 2020 Infrastructure Funding & Financing Act to properly bond debt finance infrastructure (learning from the about $US 4.2 trillion United States Municipal Bond Market / Municipal Utility District structures) …

      … As decline sets in to New Zealand residential building sector, the local building tradesmen will be keenly sought after by the Australian construction industry, to build more affordable houses there for Australians and migrating young Kiwis ! …

      Building consents issued: February 2022 | Stats NZ

      https://www.stats.govt.nz/information-releases/building-consents-issued-february-2022

      … The Infrastructure Funding and Financing Act 2020 (the Act) established a new funding and financing model to enable private capital to support the provision of new infrastructure for housing and urban development. …

      Infrastructure Funding and Financing Act 2020 – New Zealand Ministry of Housing & Urban Development

      https://www.hud.govt.nz/urban-development/infrastructure-funding-and-financing-act-2020/

      https://www.google.com/search?q=infrastructure+funding+and+financing+act+2020&gs_ivs=1#tts=0