Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Boom there it is! The Fed raises rates by 50 points, the USD goes into deep dive mode and Wall Street salivates, sending stocks up more than 3%! Bond markets saw only a mild pullback however, interestingly, with 10 year US Treasury yields pulling back to the 2.9% level. The USD lost ground against almost everything, but is still hovering near a 20 year high on the US Dollar Index as this rise was mainly prices in. Euro lifted above the 1.06 level – basically where it was last week – while the Australian dollar jumped even higher, up through the 72 level to where it was just over a week ago. Commodity prices rebounded on the lower USD with WTI and Brent crude oil up several percent, the latter through the $110USD per barrel level while gold prices lifted but still remain stuck below the $1900USD per ounce level.

Bitcoin is still on a downward trend from its March highs, but was finally able to make a new daily high as it approached but didn’t break through the $40K level. While I contend that this is still building for a further retracement down to the February lows at the $37K level, price action is now building for some upside potential in the short term:

Looking at share markets in Asia from yesterday’s session, Chinese share markets were closed again for a holiday while the Hang Seng Index slumped at the close, finishing 1% lower at 20859 points. The daily chart was showing a potential swing trade brewing here as price action comes up against the trailing daily ATR resistance at the 21000 point level, but the overall picture still points to a return to the early March lows at 18000:

Japanese stock markets were also closed for yet another holiday. The daily futures chart of the Nikkei 225 is still showing a decline but with the expectation of a lift once markets reopen in line with other risk markets. As I said previously, price needs to break out above the previous daily highs near the 27500 point level soon with a switch in daily momentum to a more positive state:

Australian stocks started off well enough, shooting up 50 points or so before selling off throughout the day, with the ASX200 losing just over 0.1% to finish at 7304 points. SPI futures are up nearly 40 points as the 7300 point level continues to firm as strong support.  The upside potential is still there, but really requires a swift close above the high moving average next around 7400 points:

European shares had a poor trading session across the continent with the Eurostoxx 50 index closing nearly 1% lower at 3724 points. The daily chart picture still looks quite bearish but futures are indicating that price is possibly finding a bottom here at the 3600 point level, with long tails of intrasession buying support helping in the last couple of sessions. The key is to breakout above trailing daily ATR resistance at the 3800 level proper with daily momentum still negative:

Wall Street loved the certainty of the rate rise and the noise thereafter from the Fed, with all three bourses moving 3% higher in unison, with the S&P500 closing at 4300 points exactly. Price action on the four hourly chart was looking encouraging before this move as traders positioned for the possible upside, negating the repeat of the pattern we’ve seen for several weeks now. Indeed, there is now building a possible inverse head and shoulders pattern to set up for a new rally here, but I remain cautious:

Currency markets have been dominated by a strong USD for so long that the move by the Fed was a bit of a shocker, sending Euro up a full handle, after being anchored at the 1.05 level for nearly a week. Short term momentum has now switched violently to strongly overbought as it breaches the trailing ATR resistance level at the 1.06 handle so can this be sustained or just a repricing?

The USDJPY pair did the exact opposite with the fall in USD sending Yen much higher, which should nominally be a big headwind for Japanese share markets when they reopen. This takes price back to the previous breakout level just below the 130 handle and is not that big in isolation, but momentum is now extremely oversold as a result:

The Australian dollar was under such enormous pressure from USD, that a blowout move was not totally unexpected with a more than 100 pip finish above the 72 handle overnight. My contention of a rollover back down to the key 70 handle and then into the 60’s as the Federal Reserve will be far more aggressive still holds, but is weakly held given this move! I’m watching for a potential rollover once the excitement is over, but positioned for more upside, potentially up to the 74 level:

Oil markets had been stabilising for a more than a week and have responded to the rate rise with a solid lift overnight with Brent solidifying here above the $110USD per barrel support level to make a new daily high. Daily momentum is finally switching to positive and just out of the negative zone, but there still remains the possibility of a drawback or breakdown below the key $100 level gaining traction, given no new weekly highs being made for sometime now:

Gold was also under a lot of pressure but had the most modest rebound of all the undollars, lifting a few points to still remain well below the $1900USD per ounce level which has turned into strong resistance. Daily momentum is still in very deep into oversold territory with the January lows around the $1800 level the next possible downside target:



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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