Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk sentiment is riding the rollercoaster once more this time an upleg despite any catalysts or fresh news. Wall Street soared overnight, lifting nearly 3% across the board, as European stocks continued to bounceback.  The recent weakness in USD continued with Euro lifting above the 1.02 level while the Australian dollar pushed through the 69 handle as markets reacted to a very hawkish set of minutes from the RBA yesterday. Bond markets were largely contained with a bit more loosening of yields with 10 year Treasuries staying above the 3% level as US interest rate futures still imply a 80bps rate rise at the next Fed meeting. Commodity prices were still volatile with Brent up more than 2% above the $107USD per barrel level while copper had a big 3% lift off its recent lows, while gold struggled again, remaining steady above the $1700USD per ounce level.

Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets started lower but recovered post the lunch break with the Shanghai Composite posting a scratch session as a result, closing at 3279 points while the Hang Seng Index  retraced more sharply, down nearly 1% to close at 20660 points. Sentiment was really waning on the daily chart with considerable overhead resistance creating a series of lower daily lows as price retraced below the early June lows around the 20600 point area before yesterday’s move. Daily momentum readings that were oversold have now reverted but this remains a swing play only until we see a substantial close above the high moving average proper:

Japanese stock markets returned from their long weekend with the Nikkei 225 the odd one out by advancing some 0.7% to be just shy of the 27000 point level, closing at 26961 points. The daily chart is suggesting another big breakout brewing above stiff resistance at the 27000 point area with daily momentum finally able to get out of its negative funk. Price had made a new weekly high, which should support further upside here as the better lead from Wall Street will help:

Australian stocks took back about half of their previous gains, with the ASX200 finishing 0.5% lower to remain above the 6600 point level, closing at 6649 points. SPI futures however are up over 1.2% however given the reversal in risk sentiment on Wall Street overnight. The daily chart is showing an interesting picture in the short term at least after trafficking sideways for sometime, as a potential bottom is forming here as support firms around the 6600 point level.  Daily momentum is still quite negative and not yet able to translate into any upside action in the short term – watch for any breakout above short term resistance here:

European stocks remained out of risk avoidance mode and again made some very positive returns, with the Eurostoxx 50 index eventually closing 2% higher at 3587 points. The daily chart looks bearish in the medium term but an obvious breakout is underway in the short term after price action hung around the March dip lows to possibly forming a bottom here at the 3400 point level. Daily momentum is now very positive, with nascent buying support turning into a proper close above the high moving average to at least confirm a swing play:

Wall Street went back to buying mode as well, with the NASDAQ up a stonking 3% while the S&P500 lifted nearly 2.8% to finish at 3936 points. The four hourly chart shows the previous rejection of the weekly highs at the 3920 point level which is now turning into something more sustainable and possibly turning into a proper recovery. With short term momentum overbought and ready to push prices higher, a warning that any failure here will likely see a retracement back to the end of June lows at 3730:

Currency markets didn’t reverse from their previous sentiment shift with USD strength continuing to wane ever so slightly, with Euro leading the way to get back above the 1.02 handle. This is a strong bounceback after dicing with the parity handle all last week and briefly dipping into the 99’s after making a 20 year low and may well just be some over-reaction to that move. Watch overhead ATR trailing resistance here as the ECB plays a mammoth catchup game against the Fed, with tonight’s meeting the critical juncture point:

The USDJPY pair stopped deflating overnight, finding some support after making new historic highs last week with a breach of the 139 handle as its consolidation edges around the 138 level. The big blowoff move had been well supported as trailing ATR support continues to lift and lock in this price action as multi year highs are taken out, creating more upside potential. Watch for the possibility of a retracement back to the low moving average on buying exhaustion if momentum doesn’t crossover to the positive side soon:

The Australian dollar has now rallied over 200 pips since bottoming out last week, with overhead resistance at the 68 handle pushed aside and a break to the 69 level firming up overnight. The Pacific Peso was dicing with the monthly downtrend line here with this short term move up not to be confused for a new trend as the RBA is still well behind the curve even if the latest minutes might point to more rate rises. Watch for a possible retracement below the high moving average in today’s session:

Oil markets are trying to recover with another short covering rally overnight sending Brent crude up more than 2% to get back above the $107USD per barrel level, continuing last week’s bounce off the $90’s lows. The $100 level is almost turning into key psychological support once again, but resistance at the former lows around the $107 is the area to beat next:

Gold can’t escape its downward path as the USD still proves too strong with no new upside moves in comparison to the other undollars, with the shiny metal finishing at the $1711USD per ounce level overnight as momentum remains negative. Price action remains stuck here that could support a bottoming action, but without a new daily high soon this could evaporate below the $1700 level:

 

 

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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