Following the usual hoopla around the US unemployment print on Friday night the start of the next trading week is almost always a quieter affair with nothing on the economic calendar to upset the risk apple cart. European shares were the most robust while Wall Street faltered at the close for mixed results. The bond market range traded with 10 year Treasury yield still above 1.9% as interest rate markets price in a full 0.25% rate rise, possibly even 0.5% for March’s Fed meeting. The USD wasn’t able to hold on against most of the majors, with the Australian dollar surging after fumbling yesterday while gold also lifted above the $1820USD per ounce former support level. Commodity markets were contained with Brent and WTI crude holding at their near decade highs while iron ore surged to a near six month high.
Bitcoin continued its surge, passing through the $44K level after breaking out on Friday night above $40K, getting above trailing ATR resistance on the daily chart for the first time since the 50% wipeout started in November last year. Daily momentum is now positive and this could be the start of a recovery rally:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares reopened following the Chinese New Year holiday with the Shanghai Composite closing more than 2% higher at 3430 points while the Hang Seng Index finished dead flat to start the week at 24579 points. This keeps price above the decline of the previous two weeks and hopefully gets it back on track to the 25000 point level reached in mid January but I’m still wary of this surge and am watching for a subsequent close above the high moving average here:
Japanese stock markets pulled back even further with the Nikkei 225 closing 0.7% lower at 27248 points. Futures are suggesting a flat start again on the open as Yen also traded flat overnight against USD as volatility comes down across all risk markets. Watch for a close above the high moving average for a low probability breakout here as a swing play is almost confirmed:
Australian stocks had yet another meandering session with a poor start that was filled by the close with the ASX200 finishing some 0.2% lower at 7110 points. SPI futures are down 11 points or so due to the uneasy close on Wall Street with the potential to pull back below the 7000 point level still probable. A recovery back to the previous weekly/monthly support levels maybe too far a stretch here as short term resistance is not being pushed aside, with daily momentum still negative and price is not yet above the high moving average so caution must continue:
European shares rebounded across the continent with the Eurostoxx 50 index gaining 0.8% as peripheral bourses pulled back a little, finishing at 4120 points while futures were effectively steady despite the uneasy finish on Wall Street. The stronger Euro continues to provide additional resistance in the short term with price action still hovering near the previous lows at 4070 points or so as momentum remains steadfastly negative:
Wall Street finished in mixed fashion with the NASDAQ taking back half its Friday’s gains, down 0.7% while the S&P500 finished up just a handful of points, up 0.1% to 4505. The four hourly chart shows price continuing to deflate from last week’s brief breakout above the previous bottoming pattern with the megaphone pattern here still working and keeping resistance contained at the 4500 point level:
Currency markets remain in a USD negative funk post the double whammy BOE/ECB meetings and NFP prints of last week, waiting for tonight’s all important US inflation print. The Euro consolidated its gains from Friday night without much movement above the 1.14 handle with the 1.15 resistance level firming in the short term as we get through the inflation print and before we get to the Fed’s meeting in March. Watch for any break below and above those levels for meaningful trends to eventuate:
The USDJPY pair managed to pull back its Monday morning session push higher, remaining contained at just above the 115 handle as it too plays out a holding pattern. Momentum was slightly overbought on the four hourly chart but is more neutral than anything as I still remain a bit wary here given the mixed signals in stock markets so watch the low moving average at the 114.90 level to remain supported:
The Australian dollar is trying to get back to its previous weekly high with a straight line surge since the start of the trading week, breaking through the 71 handle overnight but still finding resistance overhead quite strong. This is a classic swing play that has yet to turn into an outright new trend, with the 71.50 level needing to be cleared next as short term momentum remains in a neutral pattern as well:
Oil markets tried to move higher again after making another yearly high but both WTI and Brent were contained overnight, the latter pushed just below the $93USD per barrel level, still at a new 8 year high. The next target at $100USD per barrel remains a step to far, as this recent breakout maybe too overextended in the short term with momentum extremely overbought. I’m watching for a small retracement back to the $90USD per barrel level proper soon:
Gold accelerated out of its small melt up move, making another new daily high to build well above the former $1800USD per ounce support level, closing at the $1821 level. Price action has almost filled the pullback below the daily trendline from the December lows (far left on chart) having pushed well above the high moving average on the four hourly chart. Its still a long road to get back and this maybe just temporary bullishness and repositioning before the Fed’s next move, so risk management is key 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!