Last night was relatively calm for global risk markets although oil prices continued to fall from their weekend gap as Wall Street braces for a new round of earnings reports and the economic calendar begins to get busier in the latter half of the week. US stocks were able to close slightly higher while European shares were more bullish with Asian shares likely to open higher this morning. The USD remains strong although Euro was able to bounce around a little while the Australian dollar continued to fall below the 66 handle.
US bond markets sold off further with 10 year Treasury yields up to the 4.3% level while Brent crude fell sharply over the weekend gap to settle just above the $71USD per barrel level. Gold had a small uptick to almost get back to its recent high at the $2750USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were up modestly into the close with the Shanghai Composite gaining more than 0.2% to finally get back above the 3300 point level while the Hang Seng Index was up by just 0.1% to 20617 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 if short term support breaks:
Meanwhile Japanese stock markets had much better sessions on the lower Yen with the Nikkei 225 up more than 1.8% to 38605 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 looking better here:
Australian stocks started on a flat note yet again as the ASX200 closed 0.1% higher at 8222 points.
SPI futures are up 0.4% due to the better results 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 finally seeing some solid results across the continent as the Eurostoxx 50 Index closed nearly 0.6% higher to almost get back above the 5000 point level, finishing at 4969 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:
Wall Street found new life but still put in modest sessions as the US election looms with the NASDAQ and the S&P500 both up only 0.2% or so, the latter closing at 5823 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 as traders get ready for the next NFP print later this week as Euro initially bounced higher but gave up gains later in the session to finish just above the 1.08 handle.
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 still viable here:
Yen had all the action in the early Monday session with a big gap higher but overnight saw a reversal as the USDJPY pair oscillated around the 153 handle but still managed to put in a new high.
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 breaking through both short and medium term support after dropping below the 68 cent level before the recent NFP print as it fails to hold at the 67 cent level, cracking through the 66 handle.
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 were reducing somewhat in volatility late last week but the weekend gap saw Brent crude slammed back below the $72USD per barrel level on the open yesterday morning, and staying there 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 hold just below to its recent record high above the $2700USD per ounce level on Friday night despite the stronger USD across the board pushing other undollars lower, showing a lot of internal strength. This was reflected in a solid session that didn’t provide a new daily high but is keeping momentum moving.
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!