Overnight saw the release of the latest US retail sales print but Wall Street and other risk markets are really waiting for this year to end with the FOMC meeting later tonight with a Fed rate cut all but priced in. Political machinations in Europe and Canada were really the only other catalysts pushing currencies or bond markets around but King Dollar remains unopposed as Euro dipped below the 1.05 handle again and the Australian dollar made another new monthly low as it fell to just above the 63 cent level.
US Treasury 10 year yields remained at a near one month high above the 4.4% level while oil markets tried to stabilise as Brent crude drifted below the $74USD per barrel level. Gold remains at its recent lows near the $2650USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are having another poor session with the Shanghai Composite although it has fought back in afternoon trade, staying just below the 3400 point level while the Hang Seng Index is off by over 0.5% at 19686 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 was trying to get back to these overextended highs but has failed in subsequent waves so watch for another potential breakdown here:
Japanese stock markets were treading water yet again with the Nikkei 225 closing 0.1% lower at the 39447 point level.
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 indicate a rocky start to the trading week:
Australian stocks finally got out of sell mode with the ASX200 closing 0.7% higher at 8314 points
SPI futures are down 0.2% due to the lack of solid action on Wall Street overnight, which will likely more downside as the trading week goes on. The daily chart pattern and short price action suggests this rollover could build momentum to the downside as it appears support at the 8400 point level was illusory indeed:
European markets failed to get anywhere again, with the FTSE falling back nearly 1% while their were scratch sessions across the continent as the Eurostoxx 50 Index eventually closed 0.1% lower at 4942 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 was this time united with falls across the board as the NASDAQ lost 0.3% while the S&P500 closed nearly 0.4% lower at 6050 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 reverse the recent losses watch for last week’s NFP highs to come under threat next for a continued rally into the New Year:
Currency markets remain in the thrall of King Dollar with relatively low volatility overnight in the wake of the ECB and SNB cuts, continuing the downtrend in undollars as traders still await this week’s Fed, BOE and BOJ meetings. Although Euro managed a small bounceback later in the session after breaking into the 1.04 zone, it has barely managed overnight to hold above the 1.05 level.
This all still 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. The union currency is now making new weekly lows after the false NFP breakout and could slide further going into the end of the trading year:
The USDJPY pair was unable to push higher from its recent modest rebound this time rolling over below the 154 level after recently hitting a new monthly high.
Short term momentum has switched back to overbought settings as price action makes a breakout in the short term, although as I said yesterday I was wary of a post weekend pullback here back down to the 153 level on overextension and here we are:
The Australian dollar remains depressed with a series of false breakouts throughout last week’s price action just pushing it lower and lower, with yet another rollover overnight sending it to a new monthly low just above the 63 handle.
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, with a possible further breakdown going into the end of year at the 63 or even lower levels:
Oil markets are trying to re-engage post the OPEC meeting as Brent crude tries to get out of its depressed mood around the $72-73USD per barrel level, but was pulled back below the $74 level it breached on Friday night as it still can’t manage to fulfill this bounce.
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 down initially overnight after failing to hold above the $2650USD per ounce level before a very late and very slight recovery saw it still put in a new low at the $2645 level instead.
Price action had been accelerating in confidence in early December as new levels of support were being created regardless of USD strength but this pullback and rebound both had been fighting too much under the $2700 zone so I’m skeptical of any breakout here:
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!