Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Not quite calm, but no large selloffs on overnight markets as traders wipe their brow after some tough sessions but are stealing themselves for a big rate rise from the Fed soon.  The USD made another 20 year high against everything with Euro, Pound Sterling and the commodity currencies all still in near freefall, with the Australian dollar now below the 69 cent level. Bond markets saw another move higher in yields, with 10 year Treasuries pushing up to the 3.5% level for an 11-year high. Commodity prices all fell back although oil remains strong, with Brent crude still above the $120USD per barrel level, while gold dropped 2% and almost broke through the $1800USD per ounce level.

Looking at share markets in Asia from yesterday’s session, where Chinese share markets were the best of the bunch with the Shanghai Composite actually surging at the close to finish 1% higher at 3288 while the Hang Seng Index was dead flat, finishing at 21067 points. The daily chart is showing price holding above trailing daily ATR support at the 20500 point level with previously overbought daily momentum still positive. This could translate into similar falls alongside other risk markets but its still a fair way from the May lows at the 19000 point level as the next target:

Meanwhile Japanese stock markets had a sizeable pullback, with the Nikkei 225 index losing 1.3% to 26629 points. The daily futures chart of the Nikkei 225 shows how quick this retracement has occurred right after stalling out where it matters most as it failed to clear monthly resistance at the 28000 point area. Daily momentum has retraced fully from its overbought position with price action not helped by a much weaker Yen with futures indicating more downside on the open today:

Australian stocks were the worst of course, down more than 4.5% at one point on the ASX200 before eventually closing some 3.5% lower at 6686 points as it played catchup to other correlated risk markets. SPI futures are still indicating more downside, down by 0.6% so far. The four hourly charts shows where price needs to recover to get out of this one way trip:

European stocks continued to selloff but it was much more modestly, with the Eurostoxx 50 index off by only 0.7% to finish at 3501 points. The four hourly chart picture shows capitulation quite clearly with last nights session only confirming the inability to get back above key resistance:

Wall Street was volatile but managed to stave off more selling with the NASDAQ actually lifting 0.2% while the S&P500 lost just 0.3% to remain well below the 3800 point level. The four hourly chart repeats the pattern across other equity markets showing how the May lows were broken through quite convincingly and will probably act as resistance going ahead here as this rout widens. Is there a potential bottom afoot though? Price action is decelerating, but not yet anywhere near the high moving average, but watch short term momentum here for a swing trade:

Currency markets had similar downside as the ever strong USD continues to crush all the undollars with Euro leading the charge again, as this week’s FOMC meeting crystallises. The union currency continues to confirm the bearish weekly rounding top pattern, pushed down to the 1.04 handle. Price action had been contained by resistance at the 2020 lows (upper horizontal black line), for sometime now, with this crushing move setting up for a new run back to parity:

The USDJPY pair was the most stable pair again, this time making a new daily high above the 135 level, having broadcast for awhile now that USD is still dominant. Short term momentum has bounced back into highly overbought levels after suggesting more upside action in previous sessions. Continuing to use trailing ATR support here will lock in profits and indicate any turning of the tide:

The Australian dollar was hit hard again following the previous session moves, this time moving straight below the 69 handle for a new monthly low, as the recent 50 bps rise by the RBA goes up against at least a likely 75bps rise by the FOMC this week. The USD will continue to crush the Pacific Peso, which leaves the RBA in a pickle as imported inflation is about to zoom higher, with momentum hugely oversold and price action retracing all of the previous monthly gains and back below the previous weekly resistance level:

Oil markets are still absorbing the risk off volatility relatively easy with Brent crude maintaining a strong level here at the $120USD per barrel area, despite some falls overnight with the weekly trend quite intact. Daily momentum remains nicely overbought, although is rolling over slightly, and price continues to be supported at the $115 area very firmly, so my contention of a return to the Ukrainian invasion highs at or above the $140 level still holds as long as price stays above the low moving average:

Gold was again crushed overnight with a strong selloff almost down to the $1800USD per ounce level. The leapfrog of the $1850 wobbly support level was signalling a big change here but as I cautioned previously, you have to clear obvious levels of resistance and this was not done at all before the crush. The four hourly chart shows price right on key support here and any break below on the Fed rate rise could spell doom for the shiny metal, possibly joining its crypto brothers:

 

 

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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