Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk sentiment stabilised overnight only because of a lack of economic catalysts and closed markets on Wall Street due to the long weekend.  European stocks struggled without direction while the  USD was mixed against the undollars, with Euro and Pound Sterling lifting slightly, while the Australian dollar stalled out after trying to bounce back from its slamming below the 68 handle on Friday night. Bond markets were subdued due to the lack of volume, with 10 year Treasury futures indicating a 2.9% level on the reopen tonight, with interest rate futures still firming 170 bps suggested rate rises by the Fed this year. Commodity prices were also mixed, with oil prices up more than 3%, copper down to a yearly low while gold tried to stabilise above the $1800USD per ounce level but looks under stress.

Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets lifted somewhat, with the Shanghai Composite up nearly 0.5% to crossover 3400 points while the Hang Seng Index went slightly backwards, down 0.1% to 21830 points.   The daily chart is still showing a desire to breakout above the previous highs at the 22000 point level but considerable resistance is keeping this market in check, with session highs failing to match the previous false breakout tops. Momentum continues to rollover here, so be cautious of low volatility that could beget higher downside volatility soon:

Japanese stock markets however are not minding the stronger Yen, with the Nikkei 225 index up nearly 0.8% at 26150 points. Risk sentiment on the daily futures chart however still 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 had a very solid start to the week with the ASX200 finishing more than 1% higher, closing at 6612 points. SPI futures are dead flat, with the possibility of holding there until today’s 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 could easily return back to the very oversold zone and threaten new weekly lows:

European stocks were all over the place with the FTSE surging nearly 1% while the German DAX fell back 0.3%, leaving the Eurostoxx 50 index to eventually close 0.1% higher at 3452 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 was closed for a long weekend, with S&P500 futures currently suggesting a slightly lower start later tonight. The four hourly chart shows some buying support building, pushing off nascent support 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 waning in volatility with the defensive USD coming back slightly against the undollars with Euro again retracing back to the 1.04 handle. The union currency was hit hard later in the session, after failing to punch through the high moving average, with price action remaining fully below trailing ATR support smack on the 1.05 handle. There could still be a proper retracement down to the previous launch point at the mid 1.03 level next, so watch the low moving average here:

The USDJPY pair is still trying to push higher, 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 gets out of the oversold zone while price itself bounces back above the Friday lows, but it all looks illusory.  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 has put in an impressive bounce following its walloping on Friday night with price coming up to key trailing ATR resistance and the key 69 cent level overnight. However its not enough to send a clear signal coming in to today’s interest rate meeting, where a 50bps rise is expected, but still not enough to catch up with the Fed. Four hourly momentum has swung from being quite oversold to relatively neutral as this swing trade takes a pause:

Oil markets are trying to stabilise with another upside session that saw Brent crude pushed back above the $113USD per barrel level, bouncing off the previous weekly low. Daily momentum is still on the negative side, with price support holding 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 is having a similar ride to the Australian dollar with a swing trade after being considerably oversold on Friday night turning into some form of stability overnight, as its sideways bearish oscillation returns, closing at the $1807USD per ounce level. Resistance is very firm at the $1830USD per ounce level with four hourly momentum still quite negative with signs of another crack below the $1800 zone building:

 

 

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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