A very supportive speech by Fed Chair Powell, where he outlined that the Fed will do what it can to help US unemployment and that meant swift rate cuts if necessary has seen the little reversal in USD go back the dominant way that risk markets had been thinking all along. Wall Street rallied alongside everything else as the USD was sold off sharply, as Euro zoomed up towards the 1.12 handle while the Australian dollar is now threatening the 68 cent level.
10 year Treasury yields slumped nearly 9 points to just above the 3.8% level while oil prices came back strongly with Brent crude lifting back above the $78USD per barrel level. Gold was also able to recover back above the $2500USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland Chinese share markets were directionless again with the Shanghai Composite up just 0.2% while the Hang Seng Index has lost some ground to close 0.2% lower at 17612 points.
The Hang Seng Index daily chart was starting to look more optimistic a few months back but price action has slid down from the 19000 point level and continues to deflate in a series of steps as the Chinese economy slows. A few false breakouts have all reversed course and another downside move was looming here but this breakout has some potential if it clears short term resistance:
Meanwhile Japanese stock markets were still able to lift despite continued Yen volatility with the Nikkei 225 closing nearly 0.5% higher to 38364 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 subsequently broke on that retracement, and then the front fell off. We are now seeing a big fill here but Yen volatility is coming back so a return to the 38000 point level from May/June is still possible but could be a rough road:
Australian stocks were unable to finish on a good note with the ASX200 down 0.1% but still holding above the 8000 point level at 8024 points.
SPI futures are up at least 0.5% due to the retracement on Wall Street overnight so we should see continuation above the new record high today. Former medium term support at the 7700 point level will remain under pressure here as trader’s absorb the RBA’s signalling of no punchbowl for the rest of 2024, but short term momentum is starting to look good again here:
European markets were able to get going again with solid gains across the continent as the Eurostoxx 50 Index finished 0.5% higher at 4909 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 just unable to breach the 5000 point barrier. Price has cleared the 4700 local resistance level as it seeks to return to the previous highs:
Wall Street got straight back on track with the NASDAQ gaining more than 1.4% while the S&P500 closed a little more than 1% higher to 5634 points.
The four hourly chart illustrates how this bounceback had cleared the mid 5300 point level with momentum retracing fully from oversold to very positive these past two weeks. The potential for a positive breakout is again building with a swift return to the early August highs:
Currency markets had even bigger moves against USD in the wake of the Powell speech at Jackson Hole with Euro boosted right up to the 1.12 level after a mid-week pause/tiny reversal.
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 was still too much pressure from King Dollar. This is looking overbought in the short term again, but structurally supportive so I don’t expect any large dips soon:
The USDJPY is failing to get out of its downwards medium term pattern as the carry trade unwinds with a selloff in USD sending Yen much higher on Friday night as it makes for a new weekly and monthly low below the 145 handle
The overall volatility speaks volumes as it pushed aside the 158 level as longer term resistance in the weeks leading up to the BOJ rate hike. Momentum was suggesting a possible bottom is brewing as the BOJ wants to get this under control but it doesn’t look like they have any influence here:
The Australian dollar was pushing higher on the weaker USD and the recent soft unemployment print, with a mild mid week rollover and retracement back to the 67 handle completely filled and rebounding on Friday night as the 68 cent level is now under threat..
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 level will now switch to support so watch for any retracements as buying opportunities:
Oil markets are trying to move out of their previously weak position as volatility builds but Brent crude had a spike on Friday night that sent it back up to $77USD per barrel level again.
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 had been broken with short term momentum still in oversold mode as this swings into higher volatility:
Gold had tried to keep above the $2500USD per ounce level from last weekend gap but failed mid week before the Friday night reprieve, just like the other undollars with a swift return but not to a new high as it closed at the $2512 level.
The longer term support at the $2300 level remains firm while short term resistance at the $2470 level was the target to get through last week as I indicated. This is still looking a little overextended so I expect a minor pullback unless USD weakness continues tonight:
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!