Macro Morning


Overnight markets were quite mixed as European shares continued their recent poor start to the trading week while Wall Street pushed up for a new high but only barely as they rely on a handful of tech stocks that look way overextended. The USD firmed up in the wake of the latest comments by Fed Chair Powell in his testimony to Congress with most of the major currency pairs pulling back slightly. The Australian dollar remains somewhat firm though, holding justt above the 67 cent level to stay at its near six month new high.

US bond markets were flat as 10 year Treasuries stayed around the 4.28% level closed while oil prices made further losses on lower demand with Brent crude pushed below the $85USD per barrel level to give up its new weekly high. Gold is trying to make a comeback but is failing to extend above the $2350USD per ounce level.

Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are heading higher later in the session with the Shanghai Composite up more than 1% while the Hang Seng Index is steady at 17542 points.

The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session as it tried to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. Price action was looking way overextended but this retracement is still taking some heat out of the market although there are signs it may be over as the falling wedge pattern is starting to complete:


Meanwhile Japanese stock markets are doing the heaviest of lifting with the Nikkei 225 up nearly 2% or so to 41580 points.

Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term resistance had been defended with short term price action now rebounding off former support at the 39000 point level with short term momentum still positive as futures are indicating a further breakout on the open:


Australian stocks are bouncing back as well with the ASX200 gaining just over 0.8% to 7829 points.

SPI futures are down 0.5% despite the somewhat positive lead from Wall Street overnight. The daily chart was showing a potential bearish head and shoulders pattern forming with ATR daily support tentatively broken, taking price action back to the February support levels in mid April. Momentum is finally getting out of its oversold condition but has been unable to get back into positive territory with a return to the 7900 point level not yet on the cards:


European markets have moved from indecisive to nearly sell mode with losses across the continent as the Eurostoxx 50 Index closing more than 1.3% lower at 4903 points.

The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance still looming at the 5000 point barrier. Former ATR support at the 4900 point level looks like the anchor point and must hold here:


Wall Street is now only being supported by one or two tech stocks with a lacklustre session overnight following the latest NFP print as the next series of earnings reports gets underway with the NASDAQ up just 0.2% for another record high with the S&P500 up 0.1% to close at 5576 points.

The four hourly chart showed resistance overhead that had been tested last Friday before an early week slump that has now been tested and broken through, helped alongside a soaring NASDAQ. Momentum is nicely overbought now with the potential for more upside here, unless earnings disappoint:


Currency markets had been coming back against a dominant USD well before the latest NFP print last week but are starting to slip somewhat as this new trading week gains momentum with almost all the undollars underperforming overnight in the wake of Fed Chair Powell’s testimony. This has caused the usual weekend gap volatility to extend into some retracement actions with Euro pulling back to just above the 1.08 handle and barely holding on to the three weekly high in the process.

The union currency had previously bottomed out at the 1.07 level before gapping higher earlier this week with more momentum now building to the upside with the 1.0750 mid level to act as support going forward, but watch the low moving average here in the short term to come under pressure:


The USDJPY pair however is finding some support after retracing all of its gains for the week, heading back above the 161 handle overnight and firming somewhat at that level.

Short term momentum had gotten out of oversold condition but was not yet positive with price action suggesting a further pause or rollover here before the print with this move taking the pair back to last week’s finishing point. This volatility speaks volumes as it pushes aside the 158 level as longer term resistance, but could it return there on this new USD weakening trend as the BOJ tries to intervene on the ever weakening Yen:


The Australian dollar is no longer making gains after breaking out of its holding pattern as the USD fell back, remaining above the 67 cent handle from Friday night at a new six month high but possibly putting in a rounding top pattern here.

So far the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone in recent weeks with price action whipsawing around the mid 66 cent level as a point of control. This move looks much more convincing with the potential to go higher as speculation of a rate hike in August building, but I’m watching short term support here which is coming under pressure:


Oil markets are failing to stabilise after getting out of correction mode as Brent crude pulled back further after the weekend gap after making a new weekly high to return to just below the $85USD per barrel level overnight.

After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Watch daily ATR support here at the $86 level which is still broken and will likely be resistance for sometime with short term momentum now retracing out of overbought mode:


Gold is barely holding on to its breakout from late last week, ceasing the post weekend pullback to the $2350USD per ounce level overnight from turning into a retracement after failing to breach the $2400 level, settling at $2365 this morning.

Still the biggest casualty of the reaction to the US jobs report last week, the shiny metal had consistent negative short term momentum with ATR resistance still ratcheting down without any potential upside. I thought this could break even lower but shows that the $2300 level is key support going forward:


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!