Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Not a fun night of action if you’re a commodity trader overnight as risk sentiment crumbled in the wake of recession fears across both sides of the Atlantic, with European shares dropping sharply while Wall Street returned from its long weekend almost unscathed. The USD rose strongly on the defensive mood against all the undollars, with Euro and Pound Sterling smashed down to new lows, while the Australian dollar returned below the 68 handle despite yesterday’s big rate rise by the RBA. Bond markets saw a tightening of yields across the curve, with 10 year Treasuries falling back to 2.77%, with interest rate futures also pulling back slightly. Commodity prices were hammered, with oil losing more than 9%, copper down 5% to almost make a two year low while gold fell more than 2%, crushed below the $1800USD per ounce level.

Looking at share markets in Asia from yesterday’s session, where Chinese share markets were dropping sharply going into the close before recovering with the Shanghai Composite closing only a handful of points lower at 3404 points, while the Hang Seng Index finished also dead flat, closing 0.1% higher at 21853 points. The daily chart was showing a desire to breakout above the previous highs at the 22000 point level but considerable resistance is still 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 had a much better session with the Nikkei 225 index closing up 1% at 26423 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, with a large pullback probable for today’s session:

Australian stocks absorbed the RBA rate rise with aplomb with the ASX200 finishing 0.2% higher, closing at 6629  points. SPI futures are down a solid 1% on overnight volatility with more potential falls brewing as the impact of yesterday’s RBA meeting is felt. 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 slumped the most overnight with 2-3% losses across the continent and in Brexit-land with the Eurostoxx 50 index eventually closing 2.7% lower at 3359 points. The daily chart picture remains in a very bearish state here with price action pushing through the March dip lows as this classic swing action has completely turned 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 so watch for an imminent rollover:

Wall Street came back from the long weekend, with volatility ruling throughout the session, with only the NASDAQ putting on meaningful gains, up 1.7% while the S&P500 put in a scratch session lifting just 0.1% to close at 3831 points. 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, which is becoming more and more unlikely:

Currency markets had been waning in volatility which is always a clear sign that volatility is about to shoot higher and thats what we got overnight as the defensive USD threw the undollars to the floor. Euro retraced straight through to the 1.02 handle, after failing to defend support at the 1.035 mid zone. The writing was on the wall here with parity the next target below:

The USDJPY pair is still trying to push higher, but keeps getting stuck 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 absorbed the latest RBA rate rise but then did nothing else before the European session pushed it straight back down to the Friday night close well below the 68 handle. This is ominous indeed for the Pacific Peso with another rollover likely in today’s session as commodity prices remain under the pump:

Oil markets were trying to stabilise after retracing from their June highs but instead the absolute bottom fell out with Brent crude pushed back down to the $100USD per barrel level, before recovering meekly to the $103 level. Daily momentum had been on the negative side, with price support holding firm at the $106 level but this was swept away easily as the lack of a substantive move above the high moving average around the $115 area had weighed too long on sentiment, converting into that move down to the $100 psychological support level that I had been expecting:

Gold is having a tough time alongside other undollars and commodities with the bottom also falling out overnight, pushed straight through the $1800USD per ounce level to collapse down to the $1765 level overnight. Resistance had been far too strong at the $1830USD per ounce level with daily momentum picking up into the oversold zone before this move and now the flood gates are quite open for more downside (turn the chart upside down and you’d be buying):

 

 

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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