The USD fell out of bed as the ECB cut rates as stock markets were green all across the board in response. The US PPI came in a bit softer than expected which added to the speculation of a broader cut by the Fed. Wall Street continued with its rebound, again led strongly by tech stocks while European markets played catchup. Euro was able to fight back at last and the Australian dollar finally punched through the 67 cent level.
10 year Treasury yields moved slightly higher again to almost reach the 3.7% level while oil prices had a mild bounceback as Brent crude lifted towards the $72USD per barrel level. Gold had the best day of the undollars as it soared past its recent weekly highs to the $2550USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were up initially but failed to advance further with the Shanghai Composite falling nearly 0.2% while the Hang Seng Index has gained nearly 1% to 17240 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. Another downside move is again looming here as price action just can’t clear short term resistance:
Japanese stock markets meanwhile are soaring higher after a spate of recent sharp falls with the Nikkei 225 closing nearly 3.5% higher at 36833 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. Yen volatility is coming back so a sustained return above the 38000 point level from May/June just doesn’t seem possible. Futures indicate a better session today but I still contend there is not enough to build positive momentum:
Australian stocks were able to put in solid gains as well as the ASX200 closed 1% higher to extend above the 8000 point level at 8075 points.
SPI futures are up nearly 0.6% due to the continued rebound on Wall Street overnight. Short term momentum and the daily chart pattern was potentially signalling a top here and this combination could still eventuate, as support at or just below the 8000 point level remains key to filling this gap and to give a chance to move higher:
European markets were mixed across the continent with swings and roundabouts as the Eurostoxx 50 Index closed 1% higher to 4814 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 had previously cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum remains neutral for now:
Wall Street was once again led by tech stocks and helped by the lower USD as the NASDAQ gained exactly 1% while the S&P500 lifted 0.7% to close at 5595 points.
The four hourly chart illustrates how the inability to clear the 5600 point level in mid August and even match the July highs is setting up for a significant retracement that could end up at the 5100 point level as the Fed punchbowl is taken away. In the short term, momentum was not extremely oversold so this bounceback above the 5500 point level was not a big surprise – but can it stick the landing:
Currency markets had been in the thrall of a strong USD even before the recent US CPI print but the ECB cut has seen King Dollar fall off the throne temporarily as Euro soared back above the 1.10 handle after recently making a new monthly low.
The union currency had been structurally supportive despite the start of week extended dip that reversed on built in expectations of this soft jobs print, with those expectations dashed and then some on the night. Momentum had been quite oversold in the short term but has picked up here to almost overbought with overhead resistance at the 1.11 handle the area to beat next:
The USDJPY was trying to stabilise somewhat overnight, but pulled below the 142 level this morning, as the downtrend again takes charge.
Momentum was suggesting a possible bottom was brewing as the BOJ wants to get this volatility under control, but this retracement could last longer than expected and not yet out of the woods:
The Australian dollar fell out of bed after last Friday’s NFP print, making a new monthly low in the process but was able to climb out of its very weak position as the PPI print gave it legs above the the 67 handle overnight.
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. I still contend there remains potential to fall further here with the 68 handle remaining very strong resistance overhead:
Oil markets remain depressed amid OPEC’s warning but had a small relief rally overnight with Brent crude climbing back above the $72USD per barrel level in an unconvincing move.
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 remaining in negative territory, setting up for this sharp retracement and continued selloff:
Gold was able to not only extend its recent gains above the $2500USD per ounce level overnight but soar above weekly resistance in the wake of the PPI print and weaker USD with a surge through the $2550 level.
The longer term support at the $2300 level remained firm while short term resistance at the $2470 level was the target to get through last week and has been the anchor point for this week’s price action. Momentum was picking up before this breakout and is now well overextended so watch for a small pullback:
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!