Overnight saw the release of the latest US weekly initial jobless claims which came in lower than expected, with USD selling off slightly against most of the other major currencies. Wall Street actually climbed higher after its mid week slump while European shares found a bid on solid PMI numbers. Euro had some relief from its continuous breakdown with a return above the 1.08 handle while the Australian dollar rolled over again after failing to get back above the 67 cent level.
US bond markets firmed on the jobless print with 10 year Treasury yields losing nearly 4 points to just stay above the 4.2% level while Brent crude had a wide ranging session before settling at the the $75USD per barrel level. Gold had another quiet session slight pause as it remains below the $2750USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were down sharply into the close with the Shanghai Composite losing more than 0.8% to remain well below the 3300 point level while the Hang Seng Index was off by more than 1.3% to 20489 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. Price action is again bunching up at the 20000 point level setting up for another potential breakdown:
Meanwhile Japanese stock markets were having scratch sessions with the Nikkei 225 basically unchanged at 38143 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. Futures are somewhat unsettled and are indicating a mixed finish to the trading week:
Australian stocks finished on a flat note yet again as the ASX200 closed 0.1% lower at 8206 points.
SPI futures however are up nearly 0.3% due to the rebound on Wall Street overnight. The daily chart pattern was potentially signalling a top as short term price action suggests a pause at least with momentum retracing from overbought status, however the medium term picture still looks bullish but this rollover could extend further so watch the 8100 point zone closely:
European markets are still struggling but managed to eke out some positive sessions across the continent as the Eurostoxx 50 Index closed nearly 0.3% higher but remains below the 5000 point level, finishing at 4935 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 as momentum was picking up here but the lower Euro is not yet helping:
While the headline Dow Jones fell back Wall Street actually finished in the green for the most part with the NASDAQ gaining more than 0.7% while the S&P500 pushed some 0.3% higher to close at 5809 points.
Price action had a small breakout on the previous NFP print but the sequential hurricanes and Middle East tensions took a toll before CPI/PPI volatility is swinging it lower again. We can expect more volatility as we barrel into the end of the US election cycle with momentum still in negative mode:
Currency markets continued to be dominated by USD strength but last night some relief was in order with Euro having the biggest squeeze by short covering as it blasted up through the 1.08 handle. The medium term downtrend however remains in place.
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 1.09 level in the short term with the potential to make a run for parity here:
The weaker USD has pushed the USDJPY further down after getting ahead of itself mid week as it previously made a breakout above the 153 level before getting a little too far ahead of itself with a cooling off 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 so watch for the crossing of the 150 level as a harbinger of more to come:
The Australian dollar is still bound at short and medium term support after dropping below the 68 cent level before last week’s NFP print but is still failing to hold at the 67 cent level remaining below that level overnight.
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. This no longer looks like a bottoming action with momentum clearly oversold and ready for more downside here:
Oil markets are still high in volatility but couldn’t manage to hold on to a dead cat bounce as Brent crude retraced back below the $75USD per barrel level 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 but short term momentum was only slowly getting out of negative territory, but this could set up another sharp retracement if the $70-72 zone is broken:
Gold was able to barely hold on to its recent record high above the $2700USD per ounce level overnight with the stronger USD across the board pushing the shiny metal below the $2750 level.
Price action had been trying to get back to the more dominant medium term trend amid the short term confusion and volatility around the US CPI print and is now accelerating in confidence despite the higher USD with the $2700 level now the new support zone:
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!