Fedspeech that rate cuts could be more than 50 basis points got Wall Street back in the game overnight, helped along with potential pullback in Israeli aggression towards Iran. This took the heat out of oil prices but currency and bond markets remain cautious to say the least. The USD remains quite firm, keeping Euro well below the 1.10 level as the Australian dollar also remains depressed just above the 67 cent level.
10 year Treasury yields moved higher, lifting nearly 5 points to break the 4% level while oil prices reversed as Brent crude was pushed well below the $78USD per barrel level. Gold failed to find any upside as it broke down to the $2600USD per ounce level overnight.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets reopened with the Shanghai Composite lifting more than 4% to 3482 points while the Hang Seng Index had a massive slump, falling more than 7% to 21347 points, taking back most of its recent gains.
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. I was always wary of a sharp retracement on profit taking here on the return of mainland markets and here we are with the 20000 point level setting up for support:
Japanese stock markets also faltered but not at the same magnitude with the Nikkei 225 closing 1% lower at 38935 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 a possible relief rally today:
Australian stocks fell back across the board as hesitation mounts with the ASX200 falling more than 0.3% to close at 8176 points.
SPI futures are up 0.2% due to the surge on Wall Street overnight with the lower Australian dollar possibly help cushioning again. Short term momentum and the daily chart pattern was potentially signalling a top but price action still shows a clear breakout to new highs with momentum somewhat overbought, but some buying exhaustion might be setting in:
European markets are again flustered after a solid start to the trading week with some losses across the continent as the Eurostoxx 50 Index closed 0.4% lower to 4949 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 not quite overbought here:
Wall Street was able to drag itself out of its poor start to the week with a late surge as the NASDAQ put on more than 1.4% while the S&P500 also closed 1% higher at 5751 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 breakout on Friday night’s NFP print but the sequential hurricanes and Middle East tensions are taking a toll here although volatility is swinging back again:
Currency markets are remaining in the thrall of USD strength again amid the geopolitical strife with King Dollar keeping Euro squashed below the 1.10 handle after its breakdown on Friday from the NFP print with no real activity overnight.
The union currency had been structurally supportive before the Fed meeting and US jobs report but a double plunge indicated more weakness in the short term as momentum collapsed into the oversold zone with a breakdown of short term ATR support as well. Overhead resistance has now moved to the 1.11 level in the short term with any breaks above the 1.10 level likely temporary:
Rate hike speculation sent the USDJPY pair higher last week and the stronger USD has kept it elevated over the weekend gap as its stays above the 148 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 was nullified with this reversal potentially having more legs in the coming sessions:
The Australian dollar broke below short term support at the 68 cent level before Friday’s NFP print and has continued this decline but overnight saw it stabilise somewhat just above 67 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. Its wait and see mode for now:
Oil markets are still high in volatility as the Middle East wars spread, with Brent crude retracing back through the $81USD per barrel level in a selloff overnight to finish at the $77 level.
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 was only slowly getting out of negative territory, but this is a clear move higher as the Iranian oilfields are likely to be targeted next:
Gold had failed returned to its former high at the $2660USD per ounce level after bouncing off short term support last week but flopped overnight heading straight down to medium term support at the $2600USD per ounce level.
Price action was starting to show signs of upside exhaustion here as momentum slows down in the short and medium term timeframes. I was watching for any break of short term support at the $2600USD level following the NFP print as a prelude to a wider retracement on profit taking and here we are:
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!