Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

While there was a sea of green across Australian politics on Saturday, Friday night saw Wall Street put in a deep intrasession loss that was then barely filled at the end of the night. This continued high volatility is also translating into a much firmer bond market with the 10 year US Treasury yield again pulling back to the 2.7% level, with interest rate markets still continuing to price in nearly 2% of rate rises to come from the Fed by the end of the year with a 50 bps rise predicted for next month. Meanwhile the USD regained strength against the undollars with the Dollar Index up nearly 0.5%, mainly on the fall in Euro while the Australian dollar just finished above the 70 handle. Commodity prices swung a little higher with WTI and Brent crude up by nearly 1% while gold finished almost finish at the $1850USD per ounce level .

Bitcoin is still going nowhere, finishing the week in meek fashion just below the $30K level as price remains well contained at the recent near 50% loss lows. After cracking through the $25K level in the previous week, momentum remains heavily negative, if not oversold and price action has not yet recovered as trailing ATR resistance remains way overhead for now. Essentially turn the chart upside down and you’d be buying on any breakout/breakdown at the $29K level:

Looking at share markets in Asia from Friday’s session, where mainland Chinese share markets did very well with the Shanghai Composite closing up 1.6% to 3146 points while the Hang Seng Index has took back most of its previous losses, closing up nearly 3% higher at 20717 points. The daily chart is still showing price action wanting to lift higher yet it remains contained below trailing daily ATR resistance at the 21000 point level that has firmed as strong resistance. Futures are indicating a pullback on the open on Monday:

Japanese stock markets didn’t losing out either, with the Nikkei 225 index closing nearly 1.4% higher at 26739 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 flat start to the trading week given the volatility on Wall Street with support at the 26000 level proper that must hold:

Australian stocks firmed again with the ASX200 finishing 1% or so higher at 7145 points, keeping the 7000 point level intact for the week. SPI futures are down 15 points or so due to the uneasy finish on Wall Street on Friday night. The daily chart was showing a continuation of this bounce up towards the previous support, now resistance level at 7200 points but this is likely to turn into a dead cat bounce at worst or consolidation here at best with price action unable to climb above 7200 points nor momentum get out of the oversold zone:

European markets were generally positive across the continent despite some unsettling inflation prints in the previous session with the Eurostoxx 50 index finishing 0.5% higher at 3657 points. The daily and indeed weekly chart picture remains bearish in the medium term, with the short term picture unsettled at best, with no further downside but nothing to write home about either. A break above trailing ATR resistance at around 3800 points is required to indicate a proper bottoming action and of course a real new daily or weekly high as daily momentum remains negative:

Wall Street had a very strange night with the S&P500 down more than 2% at one stage before recovering to finish at just above the 3900 point level with the four hourly chart showing how the BTFD crowd has failed yet again to fill in the gaps. There is substantial resistance now at the 4100 point level, with a new weekly low suggesting a bear market is around the corner. Watch for a break below the 3850 point level as a catalyst for further selling:

Currency markets are coming back to King USD once more after the recent inflation prints with Euro retracing back down to the 1.05 handle on Friday night although it almost made a new weekly high in the process. This could be the start of a new uptrend if it can clear the 1.06 level but that has been strong resistance for sometime now as momentum retraces back from an overbought setting:

The USDJPY pair is still suffering from a lot of defensive Yen bidding, losing key support at the 129 level and falling back below the 128 handle for a new weekly low. This move has wiped out a few weeks of gains with four hourly momentum reverting from oversold levels to try to anchor at the 128 area but there has been no move above high moving average for sometime now, which spells more downside:

The Australian dollar remains on nascent uptrend from last week’s low, but its all relative, with an inability to advance properly past the 70 handle, matching last week’s intrasession high. I contend this still looks tenuous as we head into the next Fed meeting, so watch for any break below the 70 level and that trendline:

Oil markets rebounded slightly, relatively speaking with Brent closing back above the $112USD per barrel level, still a bit shy of its previous weekly high. Daily momentum remains nicely positive but not yet overbought so I remain cautious here with trailing ATR daily resistance at the $116 area the next level that has to be broken through or we continue this sideways play:

Gold has been anchored near the $1800USD per ounce level for nearly a week and finally got some upside on Thursday, with a modest move higher on Friday night to just fall short of the  $1850USD per ounce level. This once again firms up the possibility of a bottom forming in the short term, but this downtrend will remain entrenched as long as price doesn’t close above the high moving average and 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. Hugh PavletichMEMBER

    China …

    Foreign investors are fleeing China … The Economist / Stuff NZ

    https://www.stuff.co.nz/business/world/300594756/foreign-investors-are-fleeing-china

    China-Russia relations: Chinese producers lament loss of once-lucrative Russian deals … SCMP

    https://www.scmp.com/economy/china-economy/article/3178563/china-russia-relations-chinese-producers-lament-loss-once

    Joe Biden set to unveil list of economies joining Indo-Pacific trade pact aimed at countering China … Stuff NZ

    https://www.stuff.co.nz/world/us-canada/300594680/joe-biden-set-to-unveil-list-of-economies-joining-indopacific-trade-pact-aimed-at-countering-china

    North Korea and China, mass irrationality … Dr John Campbell … Youtube

    https://www.youtube.com/watch?v=WSYRQoiyUg8

  2. Hugh PavletichMEMBER

    New Zealand …

    NZ Reserve Bank tipped to raise official cash rate to highest level since 2016 … Tom Pullar-Strecker … Stuff NZ

    https://www.stuff.co.nz/business/128683248/nz-reserve-bank-tipped-to-raise-official-cash-rate-to-highest-level-since-2016

    Latest figures show that having stretched themselves further and further in recent times new borrowers are now markedly stepping back from super-high borrowing levels … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/property/115710/latest-figures-show-having-stretched-themselves-further-and-further-recent-times

    QV says upmarket homes in central Auckland have declined in value by 3.4% since January but the decline in values at the bottom of the market has been greater … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/116008/qv-says-upmarket-homes-central-auckland-have-declined-value-34-january-decline

    RBNZ Survey: 64% Of Experts Say Rising Inflation Will Push More Kiwis Into Debt … Finder / Scoop Business

    https://www.scoop.co.nz/stories/BU2205/S00401/rbnz-survey-64-of-experts-say-rising-inflation-will-push-more-kiwis-into-debt.htm