More political and macro volatility overnight as the ECB meeting came and went with no change while the odds of President Biden stepping down increase. Wall Street pulled back further alongise European stocks although the latter had some relief as Euro pulled back as USD captured the safe haven bid. Volatility is increasing across all risk markets! The Australian dollar is increasingly under pressure as it nearly breaks below the 67 cent level, having given up its six month high.
US bond markets are still seeing a steepening of the yield curve although 10 year Treasuries yields bounced up 5 points to almost cross the 4.2% level. Oil prices are now stabilising with Brent crude almost above the $85USD per barrel level while gold prices oscillated and then pulled back on the strong USD to the $2440USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are doing better with the Shanghai Composite up more than 0.3% while the Hang Seng Index is gaining some lost momentum, but only closed 0.2% higher at 17778 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 looked like turning this falling wedge pattern into something more bullish but is looking like a dead cat bounce instead:
Meanwhile Japanese stock markets have slumped as Yen appreciated overnight with the Nikkei 225 closing some 2.4% lower at 40126 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 support is now broken however on this retracment, with futures are indicating another strong pullback despite the weaker Yen overnight:
Australian stocks were unable to advance the most with the ASX200 slipping 0.3% or so to remain above the 8000 point level, closing at 8036 points.
SPI futures are down a full 1% on the strong pullback on 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 now overextended to the upside and could retrace violently here on the retraction on Wall Street, so watch for the trading week to finish well under the 8000 point level:
European markets still can’t find a positive mood although the results across the continent were mixed with some Euro weakening relief, but the Eurostoxx 50 Index still closed more than 0.4% lower at 4870 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 but is struggling to hold here – watch out below:
Wall Street was again sideswiped last night by tech stocks and political concerns overnight with the NASDAQ and the S&P500 both down 0.7% or so, with the latter closing at 5544 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 was somewhat overbought but has retraced sharply and weekly support levels are being strongly tested here so again, watch out below:
Currency markets had all their eyes and bots on the ECB meeting last night, with the USD pulling ahead on the non-result and post meeting comments as the union currency broke below the 1.09 handle and its nearly two week long uptrend.
The union currency had previously bottomed out at the 1.07 level before gapping higher earlier in the week with more momentum building to the upside with the 1.0750 mid level as support but there is too much pressure here from King Dollar so watch for a further retracement down to ATR support at the mid 1.08 handle next:
The USDJPY short term chart still looks like tumbling down a series of steps here but overnight saw some Yen weakness or USD strength rather on the safe haven bid with the pair bouncing back to the 157 level and almost getting into positive short term momentum territory.
This volatility speaks volumes as it once pushed aside the 158 level as longer term resistance, but then was unable to breach the 162 level as it looks like the BOJ intervention finally worked on the ever weakening Yen. Watch out below if this short term bounce fails to get past short term resistance, with another step down possible:
The Australian dollar had been struggling to make further gains after breaking out of its holding pattern but last night saw it properly break down and almost cross below the 67 cent handle as USD strengthened and despite the potential of a rate rise from the RBA.
During June the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone but that has changed in recent weeks with price action finally getting out of the mid 66 cent level that acted as a point of control. This move was looking 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 has now broken:
Oil markets are trying to stabilise after getting out of correction mode with Brent crude holding just above short term support, finishing back above the $84USD 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 trying hard to hold on to its breakout but is slowly sliding back under the weight of King Dollar, falling down to the $2440USD per ounce level although overnight after it ran out of steam.
While it was the biggest casualty of the reaction to the US jobs report, the shiny metal had consistent negative short term momentum that has now turned around with upside resistance at the $2400 level finally broken. The longer term support at the $2300 level was key so this should support further gains if the USD remains weak:
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!