Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Some hawkish minutes from the latest FOMC meeting and the latest ISM services PMI assuaged recession fears overnight after a wobbly start to the trading week, with Wall Street gaining modestly, while European stocks bounced back after a steep selloff previously. The USD continued to rise however against all the undollars, with Euro approaching parity and Pound Sterling at near decade lows, while the Australian dollar remains depressed below the 68 handle. Bond markets reversed sharply with 10 year Treasuries bouncing back to 2.9% on the minutes, with interest rate futures also pushing up, with expectations of a 70bps rise at the next Fed meeting. Commodity prices remain under pressure with oil down nearly 3%, copper down another 4% to almost make a two year low while gold fell another 1% or so, still crushed below the $1800USD per ounce level.

Looking at share markets in Asia from yesterday’s session, where Chinese share markets dropped sharply going into the close with the Shanghai Composite down 1.4% to 3355 points while the Hang Seng Index was off by more than 2% at one stage, eventually closed 1.2% lower at 21586 points. The daily chart is now showing a potential rollover here as price action rejects the previous  highs at the 22000 point level as 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:

Japanese stock markets are also selling off, with the Nikkei 225 index closing some 1.2% lower at 26107 points. Risk sentiment on the daily futures chart remains very poor but a small up session today is still unlikely to see 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 were the best relative performers, with the ASX200 finishing 0.5% lower at 6594 points. SPI futures are up 0.5% given the better result overnight on Wall Street, so most of yesterday’s losses should be recovered. The daily chart however 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 recovered nearly half of their previous losses on temporarily better sentiment with the Eurostoxx 50 index eventually closing 1.8% lower at 3421 points. The daily chart picture remains in a very bearish state here with price action still hanging around the March dip lows as this downtrend remains entrenched. With daily momentum quite negative, if not yet oversold, there’s little chance of price getting back well above the 3570 point area so watch for an imminent rollover:

Wall Street absorbed the ISM print and minutes fairly well with solid session as the NASDAQ and S&P500 both lifted nearly 0.4%, the latter closing at 3845 points. The four hourly chart shows more 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 still unlikely:

Currency markets remain the most volatile with no change in USD strength as it remains strong against almost everything. Euro remains under stress as it fell through the 1.02 handle, as support at the 1.035 mid zone was wiped out previously. Parity remains the target below, but watch for a potential swing trade here:

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 is still depressed below the 68 handle and on the bottom of its monthly downtrend channel (lower sloping black line) as the latest RBA rate rise becomes a distant memory in the wake of a very hawkish Fed. 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 sold off again with key support levels taken out overnight with Brent crude pushed below the $100USD per barrel level. Daily momentum is now extremely oversold with price support at the $106 level a distant memory. The target at the $100 psychological support level could be reset even lower so watch for more downside here as the commodity crash spreads:

Gold continues to have a tough time alongside other undollars and commodities with the bottom continuing to fall out overnight, pushed straight down to the $1740USD per ounce level. 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). Momentum is extremely oversold however, so I expect a minor bounce in the short term:



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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