The latest US retail sales print kept risk markets poised overnight as the better than expected results dampened expectations of a larger cut from the Fed in its upcoming meeting tonight. Wall Street was basically unchanged as a result while the USD saw a slight bid across the complex as Euro almost fell back below the 1.11 handle while the Australian dollar paused its gains above the 67 cent level.
10 year Treasury yields moved slightly higher to the 3.65% level while oil prices had another mild bounceback as Brent crude lifted towards the $74USD per barrel level. Gold took a small hit after almost pushing above the $2600USD per ounce level so its not all doom and gloom.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are still closed while the Hang Seng Index is up more than 1.3% to close at 17651 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. Short term resistance is finally coming under threat here, watch for any break above the 18000 point level:
Japanese stock markets reopened from their long weekend with the Nikkei 225 dropping more than 1% to 36203 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 remains a problem here, with a sustained return above the 38000 point level from May/June not on the cards as there is not enough bidding to build positive momentum:
Australian stocks were able to put in some minor gains as the ASX200 closed 0.3% higher to extend above the 8000 point level at 8140 points.
SPI futures are down nearly 0.5% due to the wobbly session 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 did better out of the gate last night with mild gains across the continent with the Eurostoxx 50 Index closing 0.7% higher to 4860 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 only mildly positive for now:
Wall Street tried to break out to new highs but is being forced back by sentiment around the Fed’s play this week as the NASDAQ lifted just 0.2%, while the S&P500 barely eked out a scratch session to close at 5634 points.
The four hourly chart illustrates how the inability to clear the 5600 point level in mid August and even match the July highs was setting up for a significant retracement that could end up at the 5100 point level as the Fed punchbowl is taken away. Price action is getting a little overextended again:
Currency markets are still broadly in an anti-USD mood despite the overnight pullback as King Dollar lifted against most of the undollars as it looks like only a 25bps cut is baked in tonight at the Fed meeting. Euro had a small false breakout on the retail sales print before retracing to short term support just above the 1.11 handle.
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 went from stability to outright breakout overnight, taking off some built up selling pressure as it pushed through short term resistance and the 142 level after recently hitting a new monthly low.
Momentum was suggesting a possible bottom was brewing as the BOJ wants to get this volatility under control, so this bounceback could have legs to the 144 level or higher but will pivot completely on the reaction to the Fed meeting tonight and today’s BOJ meeting:
The Australian dollar is still holding on to its climb above the 67 handle despite other undollars pulling back overnight although short term momentum is waning 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. I still contend there remains potential to pullback here if expectations aren’t met with the 68 handle remaining very strong resistance overhead:
Oil markets remain depressed amid OPEC’s warning but continued its relief rally with Brent crude climbing towards the $74USD per barrel level in a mild uplift 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 remaining in negative territory, setting up for this sharp retracement and continued selloff:
Gold was able to hold on to its gains above the $2500USD per ounce level but has retraced below its starting position as it failed to breach the $2600 level overnight, showing how tied it is to Fed sentiment.
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!