Risk markets are still reacting in the main to the expanding war in the Middle East, with oil prices spiking on potential Iranian attacks while the USD firmed due to a better than expected ISM services print. Wall Street put in another scratch session while European shares lost their shaky confidence and sold off across the continent. The USD pushed Euro further below the 1.11 level but downside momentum is now faltering, while the Australian dollar continued its fall below the 69 cent level.
10 year Treasury yields moved higher, lifting nearly 7 points to the 3.85% level while oil prices spiked and held on to their returns at the end of the session as Brent crude pushed well above the $77USD 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 Chinese share markets remain closed for the week but the Hang Seng Index reopened with a pullback, closing some 1.3% lower at 22113 points.
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 was always wary of a sharp retracement on profit taking here on the return. This could break further so watch below:
Japanese stock markets further rebounding on the rate comments with the Nikkei 225 closing nearly 2% higher at 38552 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 again unable to make headway with the ASX200 up just a handful of points to cross back above the 8200 point level.
SPI futures are down at least 0.3% due to the lack of upside momentum 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 moved from mixed to a broader selloff across the continent as the Eurostoxx 50 Index closed 0.8% lower to 4923 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 yet another set of scratch sessions across the board as confidence dissipated with the NASDAQ unchanged while the S&P500 lost the point it gained in the previous session to close at 5699 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 again moving back to USD strength amid the geopolitical strife with King Dollar still stronger against most with Euro unable to make any session highs following its recent rollover below the 1.11 handle, but momentum is slowing down.
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 sent the USDJPY pair higher in the previous session as noise out of Japan reversed the recent hawkishness, now holding just below the 147 level overnight.
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, breaking below short term support to the mid 68 cent level..
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 has dissipated here as ATR support is broken:
Oil markets are still building in volatility as the Middle East wars spread, with Brent crude spiking up through the $77USD per barrel level in a strong buying session in a more convincing 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 but short term momentum is slowly getting out of negative territory, but not yet out of the woods here:
Gold has almost returned to its former high at the $2660USD per ounce level after bouncing off short term support but can’t make a new session high as resistance builds.
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!