The USD saw a surge overnight due to a better than expected initial jobless print but also a revision in US 2nd quarter GDP but it didn’t stick completely against all the majors as it faded towards the end of the session. This kept Wall Street on edge while European markets took benefit from the lower Euro. The Australian dollar was able to hold steady just below the 68 cent level.
10 year Treasury yields were up nearly 3 points to the 3.87% level while oil prices pushed a little higher as Brent crude lifted back above the $77USD per barrel level again. Gold was able to hold again above the $2500USD per ounce zone but only just as intrasession volatility is starting to spike.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are falling again with the Shanghai Composite down more than 0.5% while the Hang Seng Index has gone the other way to close 0.5% higher at 17786 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 directionless with the Nikkei 225 closing dead flat at 38362 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 the biggest losers with the ASX200 retreating more than 0.3% to close at 8045 points.
SPI futures are up more than 0.6% despite the lower close on Wall Street overnight as the stronger AUD doesn’t seem to weigh on the market although this could change as the last session of hte trading week unwinds. Former medium term support at the 7700 point level will remain under pressure as trader’s absorb the RBA’s signalling of no punchbowl for the rest of 2024, with short term momentum and the daily chart pattern potentially signalling a top here:
European markets were finally able to put on meaningful gains as Euro weakened appreciably as the Eurostoxx 50 Index closed 1% higher at 4966 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 was slowing before this solid move:
Wall Street was again all over the place due to earnings and the GDP print with the NASDAQ down 0.2% or so while the S&P500 was up strongly at one point but failed to finish, putting in a scratch session at 5592 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 was building for a swift return to the early August highs but price seems to be anchored at short term support:
Currency markets had previously moved against USD but the King returned to form overnight as the 2nd quarter GDP figures were updated, with Euro again losing the most ground, this time retracing below the 1.11 handle.
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 was looking overbought in the short term as I mentioned before, but had looked structurally supportive so this extended dip is now threatening to turn into a wider rout:
The USDJPY is trying hard to get out of its downwards medium term pattern with what looked like a rebound session overnight but failed to breach overhead resistance and remains somewhat flat here just 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 was brewing as the BOJ wants to get this under control but it doesn’t look like they have any influence here, with a sideways trend at best:
The Australian dollar has been pushing higher on the weaker USD and the recent soft unemployment print, with the retracement back to the 67 handle completely filled and rebounding in full last Friday night, with the 68 cent level still under threat here.
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 breakout is brewing here on the four hourly chart as price action matches the previous high:
Oil markets are trying to move out of their previously weak position as volatility builds with Brent crude taking back some losses to get back above the $78USD per barrel level in a fairly weak move 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 had been broken with short term momentum still in oversold mode as this swings into higher volatility:
Gold is keeping above the $2500USD per ounce level but only just as volatility builds as it tries to return to its previous high from mid-August, settling at the $2520 level overnight.
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 and dependent on USD weakness:
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!