Wall Street got back on track overnight due to the US CPI coming in as expected with no surprises, giving USD a lift higher after it recently stumbled following the US jobs print from last Friday night. USD strengthened across the board as Euro slid further down alongside Yen while the Australian dollar held after its breakdown below the 64 cent level following the recent RBA hold.
US Treasury 10 year yields edged nearly 5 points higher to the 4.23% while oil markets stabilised their recent reversal following the Syrian toppling as Brent crude lifted slightly above the $73USD per barrel level. Gold however continued its strong post weekend rally on news of Chinese bank buying in the shiny metal, zooming through the $2700USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are having a mild session with the Shanghai Composite up 0.3% to extend above the 3400 point level while the Hang Seng Index is taking back its previous gains, off by over 0.7% to 20155 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 last month before a massive retracement. Price action however stabilised before this massive breakout after what looked like setting up for another potential breakdown if short term support broke, but this is a whole new development!
Japanese stock markets were somewhat mixed on internal inflation machinations with the Nikkei 225 eventually finishing flat at 39370 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 and futures indicate another surge:
Australian stocks were also in sell mode with the ASX200 closing 0.5% lower at 8353 points.
SPI futures are up nearly 0.5% higher with the rebound on Wall Street overnight which should cover the poor start to the trading week so far. The daily chart pattern and short price action suggests a rollover could be underway but there is a lot of support at the 8400 point level:
European markets failed to continue their strong rebound but managed minor gains across the continent later in the session as the Eurostoxx 50 Index eventually closed 0.15% higher at 4959 points.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance again 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 has started to rollover here:
Wall Street got out of profit taking mode as the CPI provided no surprises with the tech heavy NASDAQ boosted by nearly 1.8% while the S&P500 closing nearly 0.9% higher to finish at 6087 points.
Price action was looking extremely positive but perhaps the Orange Santa rally is running out of steam as the 6000 point level might turn into support going forward. If tonight’s session can hold on to these gains watch for last week’s NFP highs to come under threat next for a continued rally into the New Year:
Currency markets reacted in a low volatile fashion to the expected result from the US CPI print overnight with USD recovering from its post-NFP funk as Euro was pushed below the 1.05 level overnight.
This fits in with my contention that we are still likely on our way back to parity as traders start to price in the now very unclear future for the continent so watch out for this to turn into a dead cat bounce if the 1.06 handle is not attacked again this week:
The USDJPY pair was able to push further out of retracement mode overnight with a modest rebound after recently being pushed aside as Yen returned to strength, but this time it was above to get above the 152 level.
Short term momentum has switched to positive settings as price action makes new short term highs so this could be setting up for a further advancement here above the 152 level, but I remain cautious:
The Australian dollar remains flummoxed by RBA inaction following the hold decision as it stays below the 64 handle after being depressed all last week after making a new monthly low.
The Pacific Peso remains under pressure on reweighting risks and the lack of action from the RBA as it wants to hold through to Feb/March next year given that a rate cut from the Fed is imminent, so watch for any rally to be rejected at the 65 handle and a possible further breakdown going into the end of year:
Oil markets are trying to re-engage post the OPEC meeting but Brent crude remains somewhat depressed around the $72-73USD per barrel level overnight, still trying to get above its recent monthly low.
The daily chart pattern continues to tighten like a spring with short term momentum definitively in negative territory as medium term price action still supports a downtrend with my contention of another sharp retracement forthcoming if the $70-72 zone is not defended:
Gold broke through the $2700USD per ounce level last night following its post weekend surge on Chinese bank buying, making a new high for the month.
Price action had been accelerating in confidence as new levels of support were being created for the shiny metal regardless of USD strength but this pullback and rebound both had been fighting too much under the $2700 zone so I’m skeptical of this breakout lasting here despite strong momentum:
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!