Risk sentiment surged overnight on Wall Street with another new record high as the USD fell back while bond markets remained volatile but unchanged. European stocks still couldn’t find much confidence as ECB inflation expectations remain mixed. The Australian dollar rose slightly despite being under the pump as it remains stuck just above the 65 cent level overnight.
10 year Treasury yields eventually finished near where they started, remaining around the 4.1% level while oil prices stabilised and lifted slightly as Brent crude gained nearly 0.5% to get above the $79USD per barrel level. Meanwhile gold is still under pressure but holding on just above the $2030USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets are still bouncing back with the Shanghai Composite moving nearly 1.5% higher to 2829 points while in Hong Kong the Hang Seng Index fell back in the afternoon session, closing 0.3% lower at 16081 points.
The daily chart still shows the significant downtrend from the start of 2023 with the 19000 point support level a distant memory as medium term price action remains stuck below the 17000 point zone. Another rollover could be underway despite price bouncing off support at the 16000 point level as daily momentum is barely positive:
Japanese stock markets however couldn’t find any confidence with the Nikkei 225 closing 0.2% lower at 36119 points.
Trailing ATR daily support was being threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum remaining extremely overbought. 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 pushed back a two day decline with a positive session as the ASX200 closed nearly 0.5% higher at 7615 points.
SPI futures are flat despite the better sessions on Wall Street overnight. 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 fell back across the continent with the FTSE also joining the pity party with the Eurostoxx 50 Index finishing 0.3% lower at 4678 points.
The daily chart was showing price action meandering and not yet making a solid attempt at breaching the early December 4600 point highs before this surge with daily momentum still well overbought and price above the highs from December. There are some hopeful signs this could turn into a larger breakout overall:
Wall Street tried to be positive again but this time held on to the gains at the end of the session with the NASDAQ up nearly 1% while the S&P500 managed to lift nearly 0.9% to close at 4994 points.
Short term momentum has retraced fully out of oversold territory on the four hourly and daily chart, now getting very overbought as the 5000 point level remains the target ahead, despite the “good” economic roadblocks due to the stronger NFP and USD:
Currency markets saw another mild pullback against USD overnight with the DXY down another 0.2% as Euro remained on the floor following Friday’s NFP print, holding well below the 1.08 handle climbing slightly above the recent new weekly low.
The union currency had been somewhat weak before Friday night, after tracking sideways for nearly three weeks as short term momentum switched to negative as price action remained contained well below trailing ATR resistance. This is not looking good with the 1.07 handle to come under threat next if the 1.0720 area is broken:
The USDJPY pair is trying to stabilise after the previous session fall that saw it retrace to the 148 handle, reversing some of the Friday night gains but holding above short term support.
As I warned yesterday, four hourly momentum could retrace further here as this meltup pattern ran out of steam with the 148 level proper remaining as strong short term support, but this could fold further in Asian trade today:
The Australian dollar remains one of the weakest undollars and rolled over again overnight after failing to find some life after overcorrecting from the recent RBA meeting, taking it back to just above the 65 handle.
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 with rate cuts a possibility later today. There are some signs of deceleration here so watch the 65 level for a possible inversion:
Oil markets are trying to stabilise yet again after the solid breakout last week with another tick higher overnight as Brent crude lifted some 0.5% to get back above the $79USD per barrel level.
After clearing the key resistance level at the $80 level, daily momentum had been slightly overbought and ready to engage further to the upside, but the recent stall failed to push through so now saw the key psychological $80 level rejected so watch for the recent lows at $75 to come under threat next:
Gold tried to breakout overnight after being somewhat wobbly after its short term rally following the FOMC and BOE meetings, managing to spike above the $2040USD per ounce level before settling a few dollars below.
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:
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!