Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

Risk sentiment remains quiet upbeat as share markets continue to ignore inflationary spikes and poor economic data with the latest US personal income and consumer sentiment results intially pushing USD higher before retracing later. Currency markets are still pushing for a weaker USD although the Euro remains in an holding pattern with the Australian dollar again failing to push through the 70 cent level.  Bond markets saw more tightening of yields with 10 year Treasuries now at the 2.6% level with only 100bps in rate rises predicted by the end of 2022. Commodities remain volatile as oil prices initially spiked, then fell back as Brent crude remains anchored slightly above the $100USD per barrel level while copper lifted 2% and gold finished with a fresh new weekly high above the $1750USD per ounce level.

Looking at share markets in Asia from Friday’s session, where mainland Chinese share markets slid from the open to the close with the Shanghai Composite down more than 0.9% at 3253 points while the Hang Seng Index was in full reverse mode, losing more than 2% to close at 20156 points.  Sentiment continues to wane fast on the daily chart with considerable overhead resistance and daily momentum readings remaining nearly oversold as the previous swing play reverts back to the downtrend as support will become tested here at the 20000 point level:

Japanese stock markets slipped as the higher Yen weighs, with the Nikkei 225 finishing dead flat at 27801 points. Futures on the daily chart are still suggesting a  breakout with resistance at the previous highs at 28000 points still the area to beat. Daily momentum remains in an overbought status and while price has made a new weekly high, this market is in a pause phase for now with the overall monthly/weekly trend (sloping black line above) still in play:

Australian stocks had another very solid lift from the Fed rate hike fallout with the ASX200 closing 0.8% higher to push through the 6900 point level, closing at 6945 points for the week. SPI futures are up nearly 0.7% on the Friday night Wall Street rally with the daily chart firming a spiking breakout situation in the short term as it tries to convert the recent bottom into a new uptrend.  Daily momentum is now nicely overbought with the potential for more upside action to get near the 7000 point level:

European stocks were positive right across the continent and in Brexit-land, with the Eurostoxx 50 index lifting more than 1% to close the week at 3708 points. The daily chart shows price action moving sharply higher through overhead resistance as a bottom is formed here at the 3400 point level. Daily momentum remains overbought and ready to engage higher with the May highs at the 3850 point level the next target:

Wall Street continued its big bounceback as well, with the NASDAQ putting on nearly 2% while the S&P500 gained some 1.3% to close at 4130 points, considerably building above previous key resistance at the once elusive 4000 point level. The daily chart is also showing an attempt to get back to the May highs with momentum now pushing into overbought mode as the reaction to the Fed rate hike keeps things moving. The ability to get past the 4000 resistance zone staves off a further retracement, with confirmation here setting up for more upside, although a pause would be warranted to take a little heat out:

Currency markets are decreasing in volatility post the FOMC decision although Friday night did see some roundtripping in USD. Euro remains in a holding pattern despite general USD weakness as it was pushed back up to the 1.02 handle on Friday night but failed to make a new weekly high. The broad trend on the four hourly chart still shows a sideways holding pattern with that potential short term top brewing as resistance builds past the mid 1.02 level, so this fill in move post the Fed hike is not yet part of a new uptrend:

The USDJPY pair was slammed back down to the low 133 level on Friday as part of a mid week retracement following the Fed hike, as internal weakness continues to build here. Former ATR support at the 137 mid level has turned into solid resistance with short term momentum extremely oversold and ripe for a pullback, but there’s no evidence of any USD buyers here yet:

The Australian dollar remains in a strong position post the Fed rate hike but has not yet turned this into broader gains as the 70 handle remained elusive all last week, settling just below that level on Friday night. While there is potential for the RBA to play catchup with tomorrow’s meeting likely to bring more rate hikes, a more sustainable change in sentiment to get the Pacific Peso moving above the 70 level is not yet evident. I’m watching for a less likely but still possible breakdown on the four hourly chart below ATR support at the 69 handle:

Oil markets are trying to recover after dicing with the $100USD per barrel level for Brent crude and mid session it looked like a breakout was at hand, but this was thwarted as it closed the week out at the $103 level, remaining below the June downtrend. Price action failed to continue the previous week’s bounce off the $90’s lows, with the downtrend line yet to be beaten from the June highs and nor has daily momentum got out of its negative funk, so watch for the $100 level to continue to turn into resistance here:

Gold mad a new weekly high on Friday night, pushing through the $1765USD per ounce level, after advancing into the $1750 zone through the week in a new relief rally. This solid move has pushed aside short term resistance aside to turn this bottoming action into a proper relief rally, but is yet to clear daily ATR trailin resistance, or the actual uncle point at the $1800USD per ounce level that must be beat to call this a proper medium/long term bottom:



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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  1. Risk sentiment seemingly also completely ignoring the very real risk that the worlds economic structure could fracture this week, if Pelosi forces Xi to show his true colours.

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