The USD pulled back again as stock markets across the complex launched higher in the wake of another round of announced Chinese stimulus, with European shares advancing the most overnight. Wall Street was able to put in another record high, as the latest initial jobless claims came in a little weaker than expected. The USD gave back most of its recent bounceback against all the majors as Euro returned to the mid 1.11 level while the Australian dollar jumped higher to almost break through the 69 cent barrier.
10 year Treasury yields moved slightly higher to maintain above the 3.7% level while oil prices slumped as Brent crude crossed below the $72USD per barrel level. Gold was again the most resilient as it pushed further above the $2600USD per ounce level with a small advance.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were launching higher again with the Shanghai Composite soaring more than 3% higher while the Hang Seng Index was up more than 4% as it almost punches through the 20000 point barrier.
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 being pushed away here, as this huge breakout above the 19000 point level sets up for a run at the 20000 level, but I’m wary of a sharp retracement on profit taking here:
Japanese stock markets also did extremely well with the Nikkei 225 gaining more than 2.7% to 38925 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 possibly on the cards as positive momentum is building:
Australian stocks were being pushed along by Chinese equities with the ASX200 up more than 0.9% to close at 8203 points.
SPI futures are up 0.3% following on from the bounce on Wall Street overnight. Short term momentum and the daily chart pattern was potentially signalling a top here but price action still shows a clear breakout to new highs with momentum well overbought and ready to extend further:
European markets had a much better session overnight with strong bids across the continent as the Eurostoxx 50 Index closed more than 2% higher to 5032 points, finally getting above that 5000 point barrier.
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 is still quite positive:
Wall Street was recently struggling to find positive momentum but was helped last night by tech stocks as the NASDAQ gained 0.6% while the S&P500 lifted nearly 0.5% to close at 5745 points.
The four hourly chart illustrates the series of breakouts since the early September lows as Fed signalling is doing its thing. Price action had a small pause before the Fed meeting but its now all systems go but watch for a potentially small pullback on too much exuberance too soon, as overbought momentum indicates:
Currency markets got back into their anti-USD mood overnight, as the previous USD bounce was short lived as expected due to the big Chinese stimulus rolling packages. King Dollar fell back as Euro almost returned to its recent high as a result.
The union currency had been structurally supportive before the Fed meeting but this double plunge since did indicate some weakness in the short term as momentum pushes back into the negative zone. This has been filled however as another attempt at overhead resistance at the 1.12 level is still possible here despite this setback:
The USDJPY was able to recover from its mid week oscillations to hold on to its high overnight, almost pushing up through the 145 level but now running out of momentum.
Longer term momentum was suggesting a possible bottom was brewing at the 140 level as the BOJ wants to get this volatility under control, so this bounceback could have legs through the 144 level or higher but looks to be dominated by shorter term positioning:
The Australian dollar was on its way to breaking through the 69 level following the hold at the recent RBA meeting and its having another go at it with a double top pattern on the four hourly chart now entering into the final phase.
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. The potential for more upside remains here although momentum is clearly well overextended, which explains the sharp retracement:
Oil markets remain depressed and are building in volatility as the Middle East explodes, with Brent crude pulling back below the $72USD per barrel level overnight as this little bounceback rolls over.
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 had a mild lift overnight as it continues to be the best of the undollars advancing again above the $2660USD per ounce 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 is looking a lot better now in the short term, slightly overbought but in a moderate condition:
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!