Risk sentiment came back again overnight after a post-weekend pause caused by more hawkish than expected Fed-talk, with both European and US shares lifting around 1% in solid moves. The USD remained strong but unchanged overall, although Yen fell back and the Aussie dollar pushed higher above the 74 handle. Bond markets are seeing more yield increases across the curve with the 10 year Treasury yield almost crossing the 2.4% level as commodities were mixed as oil prices pulled back slightly and industrial metals did the same, with iron ore down 3%
Bitcoin is slowly gaining upside momentum here after being contained around the $41K level last week, reaching a new weekly high overnight at the $42K level. Daily momentum is now nicely overbought with the next level of resistance at the $44K level coming up shortly at the February highs the target in this move:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares returned to solid form with the Shanghai Composite finishing up 0.2% at 3259 points while the Hang Seng Index had a great session, bouncing over 3% to close at 21889 points. This continued volatility remains hard to trade, but the daily futures chart is showing some engulfing bullish candles plus solid swing momentum readings that suggest more upside as price heads up towards former support, now staunch resistance at the 22600 point level:
Japanese stock markets returned from another long weekend with the Nikkei 225 closing 1.4% higher at 27224 points. Futures indicating even more upside on the open around the 27400 point level supported by a much lower Yen overnight with more potential upside here as a bottom is in alongside Wall Street’s recent bounceback. Overhead ATR resistance on the daily chart has been taken out and momentum has swung well into the positive zone to be almost overbought so watch for price action to try to extend these gains past the February highs:
Australian stocks were able to translate sentiment into good returns, with the ASX200 lifting 0.8% to 7341 points. SPI futures are up about 30 points, indicating a strong open but not as high as the Wall Street result overnight. The daily chart continues to show a lot of potential here post that lower resistance line overhead taken out for a new monthly high. Momentum is getting a bit ahead of itself but should stabilise soon:
European shares finally saw some green with solid moves higher across the continent, this time the FTSE lagging but still up 0.4% while the Eurostoxx 50 index finished 1.1% higher at 3926 points. While price action is slowly moving the market closer away from a pure swing trade and into a reflation rally, it really needs to clear the 4040 point area next:
Wall Street was slightly better as it cast off the previous hawkish comments from the Fed, with the Dow up 0.7%, the NASDAQ the best up nearly 2% while the S&P500 finished 1.1% higher at 4511 points. Price action on the daily chart looks promising, having formed a double bottom at the March lows and now taken out daily overhead ATR resistance as it got back above the 4400 point level, but the potential to move out of this correction phase requires a defence of that former resistance, now support zone:
Currency markets saw no effective change to USD strength in the absence of any economic reports with Euro lifting slightly to the lower 1.10 zone overnight. The Ukrainian invasion continues to keep a lid on risk taking here with the four hourly chart showing an inversion of the previous new weekly high with the potential to fallback to the start of war position, as four hourly momentum remains negative while daily momentum is neutral at best:
The USDJPY pair continued its push higher, this time properly pushing above the 120 level overnight as the USD builds more strength against Yen in what should be an unsustainable surge. Momentum is extremely overbought with price now zooming uncomfortably above the previous trend channel. This has all the hallmarks of a retracement soon, but there’s sweet sweet profit here that is too enticing to get out of!
The Australian dollar also had the zoomies with another pitch well above the 74 handle even as commodity prices wavered as it creates a new weekly high. The four hourly chart shows a clearance of the previous weekly highs with short term momentum well overbought and my call for more upside potential possibly setting up another pause here:
Oil markets failed to follow through on their start of week bounceback last night although strong support at the $100USD per barrel level remains the key uncle point. Brent crude finished only a few dollars lower at the $113 level as the potential to return to the overshoot highs above the $130 level clearly rising as momentum gets back into the overbought zone:
Gold was unable to move higher overnight after failing to make headway on Friday night, now retracing below the nascent uptrend line from the $1900USD per ounce level bottom, closing at $1921USD per ounce. Four hourly momentum remains negative and overhead ATR resistance remains uncleared in the short term, so this needs a big break above $1950 to keep things moving along or a rollover is imminent:
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!