Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

More Chinese stimulus news has helped buoy risk taking spirits with a healthy start to the trading week on Wall Street overnight, with European shares also rebounding. The bond market saw some weakness in response, with the 10 year US Treasury yield pushed back up to the 2.8% level, with interest rate markets still continuing to price in a 50 bps rise for the Fed’s June meeting. Meanwhile the USD lost a lot of ground against the undollars with the Dollar Index down over 1%, mainly on the one month high in Euro while the Australian dollar had a small peek above the 71 handle. Commodity prices swung a little higher with WTI and Brent crude up by nearly 1% while gold finished just above the $1850USD per ounce level .

Bitcoin is still going nowhere, starting the week where it left off at well 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. This is ready to crack lower:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets were doing well at the start of the session but the Shanghai Composite pulled back to close dead flat at 3146 points while the Hang Seng Index also took back most of its previous gains, down 1.2% at 20470 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 another flat session today:

Japanese stock markets were the only non losers yesterday, with the Nikkei 225 index gaining just below 1% to close at 27001 points. The daily chart of the Nikkei 225 still has a bearish bent with this breakout another attempt to get back above the previous daily/weekly highs near the 27500 point level, which is required to properly reverse the downward trend from the March highs. Futures are indicating another good session today with support at the 26000 level proper holding for now:

Australian stocks shot out of the gate at the open but have pulled back to close with a scratch session with the ASX200 finishing only 3 points higher at 7148 points, keeping the key 7000 point support level intact for now. SPI futures are up 20 points or so with more possible upside on the very good finish on Wall Street overnight. The daily chart is now showing a bunching up of price here at the 7100 point level with a second bounce that could turn into a proper swing action up to the resistance level at 7200 points:

European markets were very positive across the continent for the first session of the week with the Eurostoxx 50 index finishing 1.4% higher at 3708 points. The daily chart picture remains bearish in the medium term, with the short term picture suggesting a potential move back up to the 3800 point level at trailing ATR resistance at around 3800 points. This is required to indicate a proper bottoming action as daily momentum remains negative:

Wall Street had a much better night after the strange volatility on Friday with the S&P500 closing nearly 2% higher to surge out of its anchor point at the 3900 point level, finishing just shy of the psychologically important 4000 level. The four hourly chart is showing another attempt by the BTFD crowd to fill in the gaps with a short term swing possible, but there remains substantial resistance at the 4100 point level, with a new weekly low still 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 now abandoning King Dollar with Euro leading the way, as the union currency zooms up towards the 1.07 handle overnight, with a 300 pip plus move since bottoming a only a week or so ago. The 1.06 level had been strong resistance for sometime now as momentum resurges into a very overbought setting so while a short term retracement on exuberance is probable here, a new uptrend is definitely underway:

The USDJPY pair is still suffering from some defensive Yen bidding, having lost key support at the 129 level last week and making a new weekly low it has remained unchanged below the 128 handle since the start of the trading week. While four hourly momentum has reverted from oversold levels there has been no move above high moving average for sometime now, which spells more downside:

The Australian dollar remains on a solid uptrend from last week’s low, but overnight found a lot of resistance at the 71 handle, evident by the overhead tails on the four hourly candles. Four hourly momentum has also retraced from extremely overbought levels so we could see some retracement here back to the trendline or the low moving average just below the 71 cent level proper:

Oil markets continue to bounce only with very minor downside moves, as traders consolidate and await further catalysts arising out of the Russian invasion of Ukraine. Brent crude closed back above the $113USD 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 had been anchored near the $1800USD per ounce level for over a week and is trying to find a bottom here, moving back above the  $1850USD per ounce level, but with some resistance building intrasession. While this firms up the possibility of a bottom forming in the short term, the downtrend will remain entrenched as long 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. Stephen Morris

    For anyone interested in the psychology of belief, may I recommend watching Sky News. https://www.skynews.com.au/opinion

    Sky’s commentators are manifesting all the behaviours typical of people who have suffered a brutal disconfirmation of belief. Specifically, they are claiming that the Liberal Party must become even more “conservative” (by their definition).

    This is not unlike the well-documented phenomenon of “loss aversion”. As Kahneman and others observed, individuals faced with a choice between a certain loss and an increasingly unlikely chance of recovering from that loss will become ever more risk-accepting. They will gamble recklessly rather than accept the fact of their loss. They seek to avoid immediate pain by risking even more pain in the future.

    In the case of the Sky commentators, rather than accepting that most Australians found the Coalition to be too extreme, they’re gambling recklessly on the idea that the weren’t extreme enough.

    In due course, as this strategy fails,we may expect to see some other form of rationalisation appear. They may, for example, begin to argue that “ordinary” people are too stupid to know what’s good for them and that they must be forced into making the “correct” decisions.

    They will also take any difficulties faced by the incoming government as “proof” that their original strategies were correct.

    p.s. This is not a comment on the election result. It’s a comment on Belief Perseverance.

    • Ronin8317MEMBER

      When you’re riding a dead horse, you don’t get off, you beat it harder.

      Pentecostal is a strange bunch. The Seventh Day Adventist have predicted the end of the world not once, but TWICE. The world didn’t end, but rather than recognizing they got it wrong, the ‘true believers’ continues to believe.

      A big part of it is influenced by what’s happening in the USA, where the media and gerrymandering have managed to eliminate the middle ground in politics. Australian don’t suffer tthe same due to the AEC being independent.

      The ‘Teal Independent’ movement is a revolt by the Liberal Party against a nutcase takeover : the Federal ICAC will get rid of ‘cancer’ like Dutton and Barnaby Joyce. Once the job is done, they’ll go back to being a safe Liberal seat for future Prime Ministers.

    • Interesting observation. Don’t watch Sky but, it doesn’t surprise me.
      “In due course, as this strategy fails,we may expect to see some other form of rationalisation appear. They may, for example, begin to argue that “ordinary” people are too stupid to know what’s good for them and that they must be forced into making the “correct” decisions.”
      Indeed, or they may simply claim they were robbed by a rigged system as Trump has done.