Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

More overnight volatility on equity markets although a late bounce on Wall Street post Fed Chair Powell’s comments that a recession is likely to be avoided.   In currency land, Euro pulled back in line with other undollars against USD, as commodity currencies continue to flounder with the Australian dollar now below the 69 handle. Bond markets saw a larger retracement in yields, with 10 year Treasuries pulling back to the 3% level before rebouding up to 3.1% while interest rate futures came back slightly further to only indicate 185 bps in rate rises by the Fed this year. Commodity prices fell back again, with oil prices falling more than 2% while gold again slipped well below the $1830USD per ounce level.

Looking at share markets in Asia from yesterday’s session, where Chinese share markets accelerated higher going into the close with the Shanghai Composite closing more than 1.6% higher to 3320 points while the Hang Seng Index has gained nearly 1.3%, closing at 21273 points. The daily chart was showing price anchored at trailing daily ATR support at the 20500 point level with daily momentum barely positive before the recent bounce but this lack of overbought momentum is telling without any substantive moves yet above the high moving average area. Price action is still a fair way from the May lows at the 19000 point level, but the overall market remains well contained:

Japanese stock markets however put in scratch sessions with the Nikkei 225 index closing just 0.1% higher at 26171 points.  The daily futures chart of the Nikkei 225 was showing a very solid start to the trading week a few sessions ago, but this has faltered with volatility in Yen not helping to translate into sustainable gains as price action can’t get back above the key high moving average level. Also, watch daily momentum readings which need to get back out of the oversold zone or another rollover is likely to eventuate:

Australian stocks were able to put in modest gains,  with the ASX200 finishing just 0.3% higher at 6528 points. SPI futures are down a handful of points so we’re likely to see a modest finish to the week as the overall volatility on Wall Street continues to weaken confidence. The daily charts continue to show price that needs to recover well above the 6600 point level before calling any bottoming action as daily momentum is still in the very oversold zone:

European stocks looked weak at the open and stayed weak throughout the session with the Eurostoxx 50 index eventually closing 0.8% lower at 3436 points, with even broader losses on the German DAX. The daily chart picture remains bearish as price hovers right on the previous daily/weekly lows from the March dip. Daily momentum remains in quite an oversold position with price needing to get back above the 3570 point area very quickly or it will roll over here:

Wall Street was again volatile overnight, before rebounding later in the session, again on Powell’s comments regarding inflation with the NASDAQ lifting 1.6% while the S&P500 closed nearly 1% higher at 3795 points. The four hourly chart is still showing a weak picture, although there are signs building of a bottom forming below the March lows which are not yet filled (lower horizontal black line). To recover out of this correction requires a rally that must go through the 3845 point area, the lows from last week and then back up through the psychologically important 4000 point zone:

Currency markets were again somewhat contained alongside their stock market cousins, with the USD still dominating against the commodity currencies with Euro unable to continue its lift higher, returning to just above the 1.05 handle. This pullback was on the cards after almost making a new two week high as it failed to push up through the 1.06 handle but found strong resistance instead. While traders might be anticipating more ECB rate rises on the back of the BOE/SNB rises, as I said last week this repricing maybe temporary given the 75bps scheduled by the Fed next month, so watch for any retracement below former trailing ATR resistance at the 1.0540 level here:

The USDJPY pair rolled over overnight, after failing to consolidate its recent big breakout above the 136 handle as Yen buying came back due to Powell’s testimony overnight. This puts price back down to the trailing ATR support level at the 135 area as the uncle point that must hold here or we could get a repeat of last week’s dump. Watch for four hourly momentum if it crosses below the oversold level:

The Australian dollar still can’t get any momentum having rolled over last week with overnight price action keeping it contained below the 69 cent level, almost matching the previous weekly low albeit in a slow deceleration. My contention of a furhter retracement below the 69 handle still holds as the Fed well remains ahead of the hapless boffins at Martin Place, but as always watch for a swing play here above the high moving average:

Oil markets are failing to stabilise after a series of lower lows that saw Brent crude overnight stay below the $110USD per barrel level, confirming its recent sharp inversion.  Daily momentum has retraced fully from its overbought status with price no longer supported at the $115 area and has crossed below ATR trailing support level as well. This could turn into a push down to the $100 psychological support level next, and very swiftly:

Gold still can’t get out of its sideways bearish oscillation with another retracement overnight pushing it down to the $1823USD per ounce level as resistance firms quite strongly overhead at the $1850USD per ounce level. Daily momentum remains negative as four hourly momentum rolls over into the oversold zone, with the short term trend is showing a series of lower low sessions, so its not yet enough to convince more buyers to step in:



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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  1. US are price takers now…..current account last night was horrible and the high dollar is making it worse

    Crack spreads are still going up for the refineries and the Permian is stalling possibly due to supply shortages

    The way they are talking about to run down the Fed balance sheet is to lift the SLR regulatory restrictions on banks and push them there ( means keeping coupons attractive ), the markets would regurgitate them at the moment. This means directing the $ 2.5 trillion RRP back to bank reserves when the reserves hit the lower limit. They don’t actually have systems to do that yet but Mr Powell was hinting something about Treasury systems the other day.

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