It was buy the dip lucky strike overnight following the US political volatility that was absorbed with aplomb with tech stocks leading the way on Wall Street overnight, but also a resurgence in European shares as they try to reverse their recent slump. The USD moved across the board with Yen appreciating while Aussie and Kiwi fell back due to Chinese growth concerns following yesterday’s broad cuts by the PBOC.
10 year Treasury yields bounced up a could points to remain above the 4.2% level while oil prices fell further after a poor start to the trading week with Brent crude remaining below the $83USD per barrel level. Meanwhile gold prices couldn’t get back above the $2400USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were down with the Shanghai Composite off by nearly 0.7% while the Hang Seng Index was able to bounceback after falling most of last week, closing 1.2% higher to 17554 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 failed to stabilise as Yen appreciated with the Nikkei 225 moving more than 1% lower to 39599 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 retracement, with futures are indicating another strong pullback as the new trading week gets underway:
Australian stocks were unable to claw back their recent losses with the ASX200 down 0.5% to remain below the 8000 point level, closing at 7931 points.
SPI futures are up over 0.7% on the bounceback 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 has retraced fully from being overbought so this could be a false breakout that spreads into a proper rout amid volatility on Wall Street:
European markets finally found a positive mood across the continent as Euro stabilised with the Eurostoxx 50 Index closing more than 1.4% higher at 4897 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 remains the anchor point but has failed previously so I’m cautious of this swing:
Wall Street got into the buy the dip mood with gains across all the major indicies with the NASDAQ moving 1.5% higher while the S&P500 lifted just over 1% to close at 5564 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:
Currency markets have pivoted following the latest ECB meeting, with the USD pulling ahead further on Friday night but some weakness returned on the political upheaval in the US as the union currency almost returned above the 1.09 handle overnight.
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 with some moves higher in Yen overnight keeping the pair around the 157 level but still unable to get 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 as Friday night saw its continued break down as it crossed below the 67 cent handle as USD strengthened. This continued overnight in response to the PBOC cuts yesterday, falling below the 66 mid cent level as a result.
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. A return to this level is on the card as short and medium term support are now broken:
Oil markets are failing to stabilise after have a solid run in the latter half of June with Brent crude keeping below short term support, breaking below the $83USD per barrel level overnight.
After breaking out above the $83 level last month, price action had stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Daily ATR support has now been broken with short term momentum now retracing into negative mode – watch out below:
Gold failed to hold on to its recent breakout as the slow slide back under the weight of King Dollar turned into a full rout on Friday night, and it has since remains below the $2400USD per ounce level as momentum inverts.
While it was the biggest casualty of the reaction to the US jobs report, the shiny metal was able to clock up some gains before this reversal, almost hitting the $2500USD per ounce level. The longer term support at the $2300 level remains key but the much stronger USD is very quickly turning the tide:
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!