Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Last night saw a bigger bounceback on stock markets with both European and US shares properly extending their recent gains, helped by a weaker USD. The reaction to Fed Chair Powells comment on containing inflation, and the latest US retail sales print wasn’t as spooky as expected either, although the bond market saw further weakening as the 10 year US Treasury yield eased back to just below the 3% level, with interest rate markets continue to price in nearly 2% of rate rises to come from the Fed by the end of the year. Meanwhile the USD lost a lot of ground, down nearly 1% as commodity currencies and other undollar assets swung much higher,  with Euro in particular coming back stronger alongside the Australian dollar. Commodity prices were a bit mixed however with oil down nearly 2% after making  a one month high, copper up slightly while gold went nowhere again as it remains anchored near the $1800USD per ounce level.

Bitcoin is going nowhere again, unable to get above the $30K level after cracking through the $25K level last week. Daily momentum remains oversold and price action is indicating a rollover is imminent:

Looking at share markets in Asia from yesterday’s session,  where Chinese share markets had a much better day after some better news regarding domestic COVID concerns with the Shanghai Composite closing 0.7% higher to 3093 points while the Hang Seng Index has stonked it in, up more than 3% to finish at 20602 points.  The daily chart was showing price action wanting to lift higher yet still below the high moving average and while it has now broken out above that level its still nowhere near the trailing daily ATR resistance at the 21000 point level:

Japanese stock markets were still in recovery mode with the Nikkei up nearly 0.5% to 26659 points. The daily chart of the Nikkei 225 still has a bearish bent with a breakout above the previous daily/weekly highs near the 27500 point level required to properly reverse the downward trend from the March highs. Futures are indicating a possible liftoff in line with overnight risk markets however:

Australian stocks had a good session with the ASX200 up nearly 0.4% to 7112 points. SPI futures are indicating a lot more upside on the open, up nearly 1% due to the big bounce on Wall Street. The daily chart is showing a continuation of this bounce up towards the previous support, now resistance level at 7200 points so watch for a further close above the high moving average here next:

European shares had green across the board, or continent with the Eurostoxx 50 index finishing more than 1.5% higher at 3741 points. The daily chart picture remains bearish in the medium term, but the short term picture looks a lot better as daily momentum has switched to nominally positive. However, a break above trailing ATR resistance at around 3800 points is required to indicate a proper bottoming action:

Wall Street followed through with a bigger bounce, the ever volatile NASDAQ lifting more than 2.5% while the S&P500 gained exactly 2% to extend its gains above the 4000 point key support level to finish at 4088 points. The four hourly chart showing that classic V-bottom about to be completed as price gets above trailing ATR resistance and the start of week session highs, with the 4100 point former support, now resistance (black line) the next level to cross:

Currency markets are no longer in the thrall of the stronger USD with Powell’s comments overnight not able to hold back the swing against King Dollar by the undollars. Euro shot out of its depressed mood after being oversold for so long, pushing up through the 1.05 handle overnight and almost making a new weekly high. Price was anchored near the previous weekly low at the 1.03 handle as a swing trade turns into a possible new rally as trailing ATR resistance level at the 1.05 level is taken out:

The USDJPY pair is still being contained somewhat following it Friday bounce back up towards the 129 level as short term momentum remains nominally positive but unexciting. This still keeps price below new trailing ATR resistance with short term momentum remaining in the negative zone so watch for a possible pullback towards the 128 area:

The Australian dollar had another uplift overnight after breaking through the 69 handle as part of a post oversold bounceback, now above the 70 level but holding here in the last few four hourly sessions. It remains to be seen if it can now springboard higher with a lot of daylight above before the next Fed meeting and subsequent rate rise:

Oil markets pulled back slightly with Brent closing at the $112USD per barrel level after briefly almost making a new session high. Daily momentum remains nicely positive but not yet overbought so I’m still cautious here with trailing ATR daily resistance at the $116 area the next level to cross as daily momentum starts to heat up:

Gold is still anchored near the $1800USD per ounce level with a tiny bounce overnight that then failed to put in a new daily high, finishing at the $1814USD per ounce level. The possibility of a bottom forming here in the short term is fading again, as this downtrend remains entrenched as daily momentum remains stuck in oversold territory. The January lows around the $1800 level remain the downside target that has yet to transform into a new support 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!

Comments

  1. US Treasury auctions are all like our AOFM tenders in that the coupon gets decided there and then….last weeks 10 year and thirty year auction’s coupons went from 1.88% to 2.88% and 2.25% to 2.88% respectively. These are real costs not like most of ours ( except the 5 year 4.75 % the AOFM throw out every so often ) Bond vigilantes making a long withheld comeback ?

    https://www.bloomberg.com/markets/rates-bonds/government-bonds/us