Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk sentiment soured on bond markets on Friday night as the latest US ISM manufacturing survey dropped to a two year low. While Wall Street bounced back nearly 1%, European stocks struggled as the whole risk complex is still contending with recession fears in the wake of central banks trying to combat inflation with more rate rises. The USD lifted slightly, albeit through some volatility with with Euro pushed down to a two week low, while the Australian dollar was slammed below the 68 handle for a new monthly low. Bond markets had all the action with a big retracement in yields, with 10 year Treasuries pulled well below the 3% level to 2.8% before recovering to 2.9% as interest rate futures moderated once again, with “only” 170 bps suggested rate rises by the Fed this year. Commodity prices were also mixed, with oil prices up more than 2%, iron ore off by more than 3% while gold continued to deflate, briefly crossing below the $1800USD per ounce level before recovering.

Bitcoin remains completely depressed here at the $19K level, having dropped from $21K at the start of the week. The overall technical picture is very bearish, watch the $19K level closely for a further breakdown:

Looking at share markets in Asia from Friday’s session, where mainland Chinese share markets slipped going into the close with the Shanghai Composite down nearly 0.3% to 3387 points while the Hang Seng Index sold off twice as fast, 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 didn’t like the stronger Yen on Friday, with the Nikkei 225 index finishing more than 1.7% lower at 25937 points. Risk sentiment on the daily futures chart shows 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, although a mild uptick is probable for today’s session:

Australian stocks were trying to escape the selling with the ASX200 eventually finishing some 0.4% lower at 6539 points. SPI futures are up a stonking 1.5%, reflecting the still volatile sessions on Wall Street on Friday night, but will this be enough to assuage fears before tomorrows RBA meeting? 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 more or less across the continent with the Eurostoxx 50 index eventually closing 0.2% lower at 3448 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 forms into 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 finally put some decent runs on the board, with the NASDAQ and S&P500 both closing more than 1% higher, the latter finishing at 3825 points. The four hourly chart shows support firming now at a lower 3700 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. With markets closed tonight, watch for futures (down 0.2% currently) to try to push above trailing ATR resistance at the 3850 level next:

Currency markets are still building in volatility with the defensive USD coming back slightly against the undollars with Euro losing control control here to retrace through the 1.04 handle on the latest PMI prints. The union currency was able to bounce back late in the session, after finding some support at the 1.036 level but 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 still trying to push on a string here, remaining below the 136 handle after failing to push above last weeks intrasession high. Support remains firm at the 134 mid level as short term momentum retraces into the negative zone while price itself retraces to below the low moving average after having had no new session highs for awhile. I remain cautious here, watching for a potential break back to the mid 134 area and then a potential breakdown if not supported:

The Australian dollar was walloped through the 68 handle on Friday night after failing to get back above the 70 handle through the week, with my contention of a further retracement here coming to fruition. The Fed well remains ahead of the hapless boffins at Martin Place, even as speculation builds of tomorrow’s interest rate meeting, with four hourly momentum quite oversold now with a potential swing trade up towards the 69 handle possible beforehand:

Oil markets are trying to stabilise with another volatile session that saw Brent crude pushed back above the $111USD per barrel level, after almost making a new weekly low in the process. Daily momentum is still on the negative side, with price support firm at 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 on Friday night as its sideways bearish oscillation is turning into a proper downtrend, pushed below the $1800USD 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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