Risk markets remain caught between rate cut speculation, the upcoming US NFP print on Friday night and the seemingly expanding war in the Middle East, almost all without any key moves overnight. Wall Street put in a scratch session while European shares continued their very soft mood with mixed results. In currency land, some softer talk around rate hikes in Japan saw Yen sell off but not much else across the complex as Euro remain depressed below the 1.11 level while the Australian dollar tried hard to get back above the former 69 cent barrier but couldn’t manage any upside momentum.
10 year Treasury yields moved slightly higher, lifting just 4 points with the whole yield curve rising while oil prices tried to spike again but moderated their returns at the end of the session as Brent crude remained above the $74USD per barrel level. Gold again tried to find some upside but is seeing a lot resistance at the $2660USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Mainland and offshore Chinese share markets are still closed for the week.
The Hang Seng Index daily chart shows how short term resistance was finally being pushed away with a huge breakout above the 19000 point level that then set up for a run at the 20000 level in the response to PBOC stimulus but I’m wary of a sharp retracement on profit taking here when markets return next week:
Japanese stock markets failed to rebound with the Nikkei 225 closing more than 2% lower at 37808 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 but futures are indicating possible stability returning:
Australian stocks were pushed slightly lower due to the lack of a lead from Chinese bourses with the ASX200 losing around 0.1% to close at 8198 points.
SPI futures are flattening and could break lower due to the selloff 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, but some buying exhaustion might be setting in:
European markets were somewhat mixed across the continent as the Eurostoxx 50 Index closed just 0.2% higher to 4963 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 is rolling over here:
Wall Street put in a set of scratch sessions all across the board as confidence dissipated with the NASDAQ unchanged while the S&P500 not even up 1 point to close at 5709 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 further pullback here as short term ATR support has now been broken:
Currency markets are slowly moving back to USD strength amid the geopolitical strife with. At the end of the session, King Dollar was still stronger against most with Euro unable to make any session highs following its recent rollover below the 1.11 handle.
The union currency had been structurally supportive before the Fed meeting but this double plunge since indicated more weakness in the short term as momentum has now collapsed into the oversold zone with a breakdown of short term ATR support as well. It looks like overhead resistance at the 1.12 level is still too hard to breach and the 1.11 level may turn into another level of resistance in the short term.
Rate hike speculation is sending the USDJPY pair higher as noise out of Japan has reversed the recent hawkishness, sending it through the 146 level in a swift breakout.
Momentum had gotten very oversold following the break of the bearish rising wedge pattern and I thought this could be a dead cat bounce with another return to the 140 level but that has been nullified in just one session!
The Australian dollar really wanted to hold above the 69 level following the recent hawkish RBA meeting and in the wake of more rate cut signalling from the Fed but it can’t beat the run to safety in USD, staying just above short term support.
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 was clearly well overextended – watch ATR support next:
Oil markets are still building in volatility as the Middle East wars spread, with Brent crude spiking up through the $76USD per barrel level in a wide ranging session before settling at the mid $74 level this morning.
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 but short term momentum is slowly getting out of negative territory, but not yet out of the woods here:
Gold had a mild pullback to start the week but this has been filled and then some as the shiny metal almost returned to its former high at the $2660USD per ounce level after bouncing off short term support.
Price action was starting to show signs of upside exhaustion here as momentum slows down in the short and medium term timeframes. I continue to watch for any break of short term support at the $2600USD level going into this week’s NFP print as a prelude to a wider retracement on profit taking:
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!