Last night saw the return of bond market volatility with Treasury yields spiking up through the 1.6% level again as the USD rebounded against all the majors, with Euro taking a very deep dive. Wall Street was unchanged as a result with minor scratch sessions, while European shares had solid lifts higher, but look subdued in futures, indicating a poor start for Asian shares this morning. Gold is still floating along above the $1850USD per ounce level while other commodity markets were mixed with oil futures falling back nearly 1%, copper losing 1% while iron ore remained below the $90 level.
Bitcoin started the week with a bang, lifting up through the $65K level but was unable to make it stick and fell back down to last week’s low instead. Short term momentum readings are no longer positive, so watch for another close below the $63K level below the low moving average on the four hourly for signs support has vanished:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares put in scratch sessions with the Shanghai Composite down 0.1% to close at 3533 points while the Hang Seng Index nearly did the same, closing 0.2% lower at 25281 points. Price action is wanting to follow through on the one-day breakout reversal but can’t engage sufficiently to the upside to warrant everyone piling in, with hesitation over the medium term downtrend still dominating. Another solid close above the high moving average is required to get it moving:
Japanese markets had a small surge despite a poor GDP print, with the Nikkei 225 closing some 0.5% higher at 29776 points. Futures are indicating a flat start to the session even though daily momentum remains positive, resistance overhead at 30000 points looks way to strong here to get things moving back to the September highs:
Australian stocks also put in a solid start to the trading week, despite a higher Australian dollar with the ASX200 closing 0.4% higher at 7470 points. SPI futures are indicating a pullback of this move on the open as overhead resistance at the 7500 point level is still proving too hard to beat, even though short term momentum looks quite strong:
European markets all had solid sessions although the FTSE put in a scratch session, with the German DAX finally put in a proper finish, lifting 0.3% to close at 16148 points. Price is finally building momentum above the 16000 point level with the daily chart looking better as prices slowly move their way upwards with very firm support as a sharply lower Euro provides a steady tailwind:
Wall Street however pumped the brakes as the fallout from the bond market hit equities, as all three bourses put in scratch sessions. The NASDAQ and S&P500 were both unchanged, the latter gaining a single point to close at 4683 points. The four hourly chart shows price still hovering below last week’s intrasession and record high with hesitation building here as the USD gains so much against other currencies in the inflation surge. While a follow through on negativity around the inflation print has not yet occurred there are signs that a top may have been reached at the 4700 point level? Or don’t fight the Fed?
Currency market volatility came back with a flourish for almost no reason, basically off the back of some central back speeches and not much else as the US inflation bugaboo continued. Euro was slammed hard, pushed to the mid 1.13 level. Momentum had been extremely oversold and had a minor reversion for the possibility of a relief short term trade like other risk currencies but price never got above its own high moving average and collapsed instead to a new low for the calendar year:
The USDJPY pair had a minor breakout, pushing up through the 114 handle overnight, able to bounce off the Friday session lows but not yet exceed last weeks highs. This does setup for more potential upside during the Asian session with positive momentum picking up but not yet overbought as support at the 113.70 level firms here:
The Australian dollar was unable to turn its swing relief rally into anything sustainable, pulling back overnight to mid 73 level, rejecting overhead resistance and confirming the downtrend in the process. The continued pressure on iron ore and other commodities prices weighs heavily again for the Pacific Peso, so watch for another close below the low moving average on the four hourly chart to revert back to last week’s low:
WTI and Brent crude futures were unable to get any buying support with Brent retracing nearly 1% to finish right on the $82USD per barrel level. Price action is still deflating following the near breakout move off daily ATR support but while daily momentum is not behind further upside, support is obviously firm at the $80 level or thereabouts, with a clear uncle point at ATR support:
Gold wants to continue its own zoom higher following last week’s US inflation print, having pushed right through the $1850USD per ounce level but has yet to make a new daily high as price action was obviously well overbought. Last night saw it pause at just above the $1860 level with momentum readings reverting back below overbought, with the bearish rising wedge pattern nearly fully formed on the four hourly chart making me cautious here:
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!