Overnight saw a retracement of Friday night’s ebullient and anti-USD moves with the latest US durable goods order print putting in a mixed result. Wall Street was up initially but stumbled on tech earnings while European shares were largely unchanged. The USD has seen a rebound which is more like a reversion to mean with Euro pulling back below the 1.12 handle while the Australian dollar slipped below the 68 cent level.
10 year Treasury yields barely moved with a small blip higher to just above the 3.8% level while oil prices came back strongly with Brent crude lifting back above the $80USD per barrel level. Gold was able to hold again above the $2500USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were directionless again with the Shanghai Composite unchanged while the Hang Seng Index has lifted nearly 1% to 17771 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 are pulling back due to continued Yen volatility with the Nikkei 225 closing more than 0.6% lower at 38110 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 able to start the new trading week on a good note with the ASX200 up more than 0.7% to extend well above the 8000 point level.
SPI futures are barely moving however due to the small retracement on Wall Street overnight. 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 unable to start the new trading week with solid momentum with pullbacks across the continent as the Eurostoxx 50 Index finished 0.2% lower at 4896 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 but momentum is slowing:
Wall Street was also mixed with some mild falls on the NASDAQ which lost a little more than 0.8% while the S&P500 closed 0.3% lower to 5616 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 but price seems to be anchored at short term support:
Currency markets had even bigger moves against USD in the wake of the Powell speech at Jackson Hole on Friday night with a lot of this move pulled back instead as the weekend gap was absorbed. Euro pulled back the most after boosting right through the 1.12 level but still looks strong here.
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 although it is trying to bounce out of its monthly low below the 145 handle with a small move higher overnight.
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 with Brent crude spiking higher following the weekend gap to get just above the $80USD 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 $2520 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!