Macro Morning

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An absence of news overnight saw European shares rally while Wall Street took a small breather as the USD lost some further ground against the major currency pairs. The Australian dollar is trying to get out of its depressed mood with a continued move above the 65 cent level.

10 year Treasury yields slipped slightly below the 4.2% level while oil prices continued to lift with Brent crude now moving above the $82USD per barrel level. Meanwhile gold is still under pressure as it breaks below the $2020USD per ounce level.

Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were closed for the New Year holiday, and will do so all week while in Hong Kong the Hang Seng Index was also closed.

Japanese stock markets were only able to put in scratch sessions with the Nikkei 225 closing just 0.1% higher at 36897 points.

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Trailing ATR daily support was never threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum getting back to overbought readings with a significant breakout. A selloff back to ATR support at 32000 points remains unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here on any volatility:

Australian stocks are not doing well in the first session of the trading week with the ASX200 down 0.4% at 7614 points.

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SPI futures are up 0.3% as they try to play catchup to the recent strong sessions on Wall Street. The daily chart is looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. I would still watch for any continued dip below the low moving average and conversely with a breakout above the 7600 point level:

European markets were able to play catchup overnight with good gains across the continent with the Eurostoxx 50 Index eventually finishing 0.6% higher at 4746 points.

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The daily chart shows price action still on trend after breaching the early December 4600 point highs with daily momentum still well overbought with futures indicating another stronger open this evening. There are some hopeful signs this could turn into a larger breakout overall:

Wall Street was looking positive again but only the DOW advanced as the NASDAQ slipped 0.2% while the S&P500 put in a scratch session to remain above the magical 5000 point level, closing at 5024 points.

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Short term momentum has retraced fully out of oversold territory on the four hourly and daily chart, now getting nicely overbought as the 5000 point level becomes support going forward, as nobody can yet stop this music:

Currency markets saw another mild pullback against USD with Euro trying to regain its strength after being on the floor following last week’s NFP print, but is still struggling to get above the 1.08 handle.

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The union currency had been climbing slowly all week after the big reaction that saw it drop to a new weekly low almost below the 1.07 level and is not yet out of the woods. Short term momentum has now switched to slightly overbought but price action is well contained below trailing ATR resistance. Watch for a larger retracement if the 1.0720 area is broken:

The USDJPY pair was able to stabilise again after a staid previous session following a surge through the 149 handle, holding at a new weekly high.

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This is looking very optimistic as Yen sells off due to BOJ meanderings but I’m wary of a pullback to the recent highs at the mid 148 level, so watch any inversion in short term momentum carefully:

The Australian dollar is not acting like one of the weakest undollars although with a melt up move in place but failing to really stick above teh 65 handle after being unable to find confidence after the recent RBA meeting.

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The Aussie has been under medium and long term pressure for sometime with the latest rally just a relief valve being let off before this realignment back to a strong USD. There are some signs of a breakout here so watch the 65 level for a possible inversion above trailing ATR resistance:

Oil markets have been able to stabilise from their recent launch higher with a solid breakout in the previous session confirmed with Brent crude now lifting above the $82USD per barrel level overnight.

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After retracing down to trailing ATR daily support at the $77 level, price is now back above the weekly resistance levels that so far have held from the January false breakout with the short term target the late January highs above $84 next:

Gold remains quite wobbly after its short term rally following the FOMC and BOE meetings, this time unable to hold above the $2020USD per ounce level overnight as it completes an ascending triangle pattern on the daily chart.

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Daily momentum is still in a negative mood and short term support at just above the $2000 level will likely come under threat next here if the USD gains further strength, so watch for break below the triangle line:

Glossary of Acronyms and Technical Analysis Terms:

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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

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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!