Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Stock markets had very high volatility overnight as global recession fears mount, but a late rally saw Wall Street eventually finish to the upside. This follows the crash in Chinese stocks yesterday as authorities ramp up their COVID restrictions while the PBOC tries to shore up confidence with more reserve ratio cuts. Bond markets remains where the action is, with the 10 year US Treasury yield falling back to the 2.8% level while USD is at a two year high, even as Yen firms, Euro drops to a near five year low.  The Australian dollar was poleaxed again, now down below the 72 handle as commodity prices fell back, with WTI and Brent crude oil falling nearly 4% and gold fell out of bed to collapse below the $1900USD per ounce level.

Bitcoin remains in a depressed state with continued oscillation around the $41K level where it managed to fall below overnight after another failed breakout. 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 with a proper breakout:

Looking at share markets in Asia from yesterday’s session, where Chinese share markets sold off very sharply, with the Shanghai Composite closing 5% lower at 2923 points while the Hang Seng Index was crushed nearly 4% lower to 19869 points.  The daily chart shows yet another capitulation move here with strong resistance at the 22600 point level a distant memory as momentum keeps going negative here – the trend is pointing to a return to the early March lows at 18000:

Japanese stock markets also felt the heat, with the Nikkei 225 retreating nearly 2% to close at 26590 points with futures indicating a mixed start on the open as overnight volatility on Wall Street and a higher Yen dominate risk taking. Daily momentum is reverting to a negative state with price hovering above previous daily ATR support as it still rejects weekly resistance at the 27500 point level. Watch for any potential break below the low moving average on capitulation of confidence:

Australian stocks were closed but SPI futures were down nearly 3% at one stage before recovering to around the 7300 point level, so a 1% drop is expected on the open to play catchup. The daily chart was showing a lot of potential with daily momentum remaining strong, but with price unable to push aside resistance at the former highs and now playing catchup to the risk off moves in overseas markets, this could spell trouble as we head into the election:

European shares all sold off sharply throughout their sessions although came back in post close futures with the Eurostoxx 50 index finishing 2.1% lower at 3757 points. I’ve been noting that resistance was way too strong at the 3900 zone and has kept this market in a bearish mood for sometime now. The longer term picture does not look good, so I’m watching for another breakdown soon:

Wall Street at first continued its decline from Friday night before finding a bottom – of sorts – with rebounds very late in the session. The NASDAQ eventually closed 1.3% higher while the S&P500 finished up 0.5% at 4296 points. Price action on the four hourly chart shows the oversold price action before the bottoming out and stepping in of the BTFD crowd but this is not yet over and requires a climb well above the 4400 point level to turn this correction into just another dip:

Currency markets are seeing a clear trend in a stronger USD but also a move to defensive currencies like Yen, with Euro and Pound Sterling at new structural lows overnight. The union currency collapsed down to the 1.07 handle and is looking very weak, but somewhat oversold here, having reversed more than 200 pips since last week’s mid-week breakout.  There is substantial resistance overhead at the 1.08 level that needs to be cleared soon or the long term trend down to parity will continue:

The USDJPY pair is still contained but there is growing downside volatility brewing as the consolidation at the 128 level is starting to slip with a brief move down to the mid 127 level. Short term momentum shows this with a breakdown to oversold conditions before a return to almost neutral, but I think something is brewing here to bring this trend finally under contorl:

The Australian dollar was hammered last week and no-one put the hammer away overnight until the mid 71 level was reached where a possible – but unlikely – bottom was found very late in the session. This move re-writes the thesis for Australian dollar strength as the RBA leans into a rate rise either before or post election, so watch for a follow through below the 71 handle:

Oil markets are failing to stabilise after a potential breakout was thwarted last week, instead moving nearly 4% lower overnight with Brent returning to the $102USD per barrel level, breaking below the low moving average on the daily chart in the process. Daily momentum is now rolling over back into the negative zone, wiping out any upside potential, with a drawback to the key $100 level still possible to really see how strong it is as a support level:

Gold has a similar trajectory and was hit hard overnight to fall below the $1900USD per ounce level for a new monthly low, taking out this very psychologically important support level. Daily momentum has now switched to oversold and we are likely to see a follow through here below with the January lows around the $1800 level quite possible:



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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  1. Hugh PavletichMEMBER

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