Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk sentiment continued to lack confidence overnight as downward volatility returned to equity markets as Wall Street fell nearly 1% in the wake of poor consumer spending data, while European stocks sold off as German unemployment spiked unexpectedly. The USD didn’t benefit as much as expected on the defense, with Euro surging, also helped by a higher than expected French CPI, while the Australian dollar remained depressed below the 69 handle with a very small uplift. Bond markets saw more retracement in yields, with 10 year Treasuries pulling back below the 3% level as interest rate futures moderated once again, with “only” 180 bps suggested rate rises by the Fed this year. Commodity prices were also mixed, with oil prices down more than 2%, iron ore off by more than 3% while gold continued to deflate, almost crossing below the $1800USD per ounce level.

Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets stood out by doing quite well as the Shanghai Composite closed more than 1.1% higher to 3398 points while the Hang Seng Index fell back again, down 0.6% to close at 21859 points.  The daily chart was showing an attempt to breakout above the previous highs at the 22000 point level but as I warned previously, those overhead tails on the previous daily candles that matched the previous false breakout top were indicating a lot of intrasession resistance. Momentum continues to rollover here, so be cautious of low volatility that could beget higher downside volatility soon:

Japanese stock markets however felt the heat more with the Nikkei 225 index closing 1.5% lower at 26393 points. Risk sentiment remains sour despite a lower Yen, with the daily futures chart showing possible further downside with price action still unable to make any move above the high moving average. Daily momentum is building on the negative side as this looks more and more like a dead cat bounce:

Australian stocks couldn’t escape the selling with the ASX200 finishing more than 1.9% lower, closing at 6568 points. SPI futures are up only slightly, around 0.2%, reflecting the still volatile sessions on Wall Street overnight. The daily chart remains an ugly picture with my contention of price needing to recover well above the 6600 point level before calling any bottoming action still holding, as daily momentum wants to return back to the very oversold zone and threaten new weekly lows:

European stocks had a poor start to the session and stayed down as local economic data egged on more recession concerns with the Eurostoxx 50 index eventually closing 0.7% lower at 3454 points. The daily chart picture remains in a very bearish state here with price action wanting to get back to the March dip lows as this classic swing action looks like a dead cat bounce instead. With daily momentum remaining negative, there’s little chance of price getting back well above the 3570 point area that was resistance for the last couple of weeks:

Wall Street still can’t get out of its funk, with the NASDAQ losing 1.3% while the S&P500 closed nearly 0.9% lower to finish at 3785 points. The four hourly chart shows support tossed aside at the 3820 point level, with price unable to get back above the previous resistance zone from the last false rally.  A proper recovery out of this correction requires a rally back through the psychologically important 4000 point zone, which is getting more and more out of reach:

Currency markets are building in volatility with the once defensive USD stepping back slightly against the undollars with Euro surging up through the 1.04 handle on the French CPI and German unemployment prints, but ran out of puff at the end. The union currency remains well below the 1.05 handle and will still put in a new weekly low as price action remains fully below trailing ATR support. There could still be a proper retracement down to the previous launch point at the mid 1.03 level next:

The USDJPY pair is trying to push on a string here, failing to advance again, now pushed below the 136 handle after failing to push above last weeks intrasession high. While this confirms the uncle point at the 134 handle as four hourly momentum remains overbought, price has retraced to below the low moving average after having had no new session highs for awhile, so I remain cautious, watching for a break back to the start of week position:

The Australian dollar remains in its place after previously failing to get back above the 70 handle, with overnight action seeing a small blip higher before retracing back below the 69 level. My contention of a further retracement below the 69 handle still holds as the Fed well remains ahead of the hapless boffins at Martin Place, even as speculation builds of next week’s interest rate meeting, with four hourly momentum remaining quite negative – watch for a go at the 68.70 level next:

Oil markets are failing to stabilise with another volatile session that saw Brent crude pushed back below the $109USD per barrel level, almost making a new weekly low in the process. Daily momentum is building on the negative side, with price support moving back down to the $106 level. The lack of a substantive move above the high moving average around the $115 area is now weighing on sentiment, which could turn into a push down to the $100 psychological support level next:

Gold had another wild ride overnight as its sideways bearish oscillation is turning into a proper downtrend, pushed below the $1810USD per ounce level as resistance again firms at the $1830USD per ounce level. Daily momentum remains negative as four hourly momentum also stays in the oversold zone, with the short term trend firming to crack below the $1800 zone next:

 

 

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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