Wall Street reopened on Friday night but I’m sure most traders would have wanted a long weekend instead as the latest US non-farm payroll aka unemployment print came in stronger than expected, pushing USD higher against almost everything while stocks lost significant ground across both sides of the Atlantic. With no one willing to bet against USD at the moment, the undollars were already under the pump with Euro making a new low while the Australian dollar collapsed into the 61 cent zone.
The yield curve flattened for US Treasuries with the 10 year gaining more than 8 basis points to above the 4.7% level to a near two year high while oil markets build higher again as Brent crude almost closed above the $80USD per barrel level. Gold was relatively unchanged and unmoved by the NFP print with a steady trend continuing higher as it briefly touched the $2680USD per ounce level.
Looking at stock markets from Asia in Friday’s session, where mainland Chinese share markets have again failed to make any positive moods with the Shanghai Composite down more than 1.3% to cross well below the 3200 point level while the Hang Seng Index was also in full retreat, falling 0.9% to 19064 points.
The Hang Seng Index daily chart shows how resistance formed around the 21000 point level with only one false breakout in late November squashed back to the 20000 point level where price action has stayed since. This is still setting up for another potential breakdown here:
Japanese stock markets were also off significantly with the Nikkei 225 losing more than 1% to close well below the 40000 point level at 39190 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 but resistance is firming:
Australian stocks were the best performing in the region but still fell with the ASX200 closing more than 0.4% lower at 8294 points.
SPI futures are up by nearly 0.4% or so as traders bet this Aussie dollar supported trend will continue in the last session of the week. The daily chart pattern and short price action suggests this rollover has built a little too much momentum to the downside even if support at the 8400 point level was illusory indeed with a bearish flag suggesting a break below the 8200 point level next:
European markets were unable to get back on track on Friday night despite the lower Euro with the Eurostoxx 50 Index closing 0.8% lower to retreat below the 5000 points, closing at 4977 points.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance unable to breach the 5000 point barrier in recent months. Price had previously cleared the 4700 local resistance level as it seeks to return to the previous highs as momentum tries to pick up strongly here with the 4900 point level turning into strong support:
Wall Street reopened with too many risk factors at play to make any impact in a truncated trading week with the NFP pushing the whole edifice over with the NASDAQ falling nearly 2% while the S&P500 fell more than 1.5% to close at 5827 points.
Short term price action was looking somewhat ominous before Friday night with a triangle pattern and support at the 5900 point collapsing as the bottom pickers stood aside to make a new low:
Currency markets remained in the thrall of King Dollar well before the NFP print with almost everything sliding further lower except Yen, with Euro breaking its previous weekly low to head back below the 1.03 handle with a brief attack on the 1.02 level as well.
The union currency was ready to make new lows anyway and will likely slide further back towards the new year low and head towards parity soon:
The USDJPY pair moved around quite a bit during the NFP print was eventually closed a little lower to break below the 158 handle after struggling to make headway all week as the daily trend channel pattern starts to revert to mean.
Short term momentum has reverted out of extremely overbought settings but is still very positive indeed as price action settles down but there is still potential for more upside here dependent on trading activity as the new year begins, but watch for a potential rollover here:
The Australian dollar remains one of the most depressed undollars with the very weak fightback before Xmas turning into nothing sustainable as it continues to lose traction and stays in retreat below the 62 handle, accelerating down to the mid 61 level on Friday night.
This breakdown has been on the cards for weeks and will reverberate into the new year as the currency finally reweights according to its position in the global economy – lower tier. Watch for overhead ATR resistance on the four hourly chart to be rejected again:
Oil markets are doing well to re-engage post the OPEC meeting as Brent crude got out of its depressed mood around the $72-73USD per barrel level recently, with this push above the $77 level re-engaging on Friday night with a big breakout that almost pushed through the $80 level.
The daily chart pattern has broken out of its spring formation with short term momentum bursting into overbought territory with a run up to the $80 level probable, but needs another breather first:
Gold is trying to get back on track and was able to advance slightly further on Friday night after recently exceeding its previous high at the $2660USD per ounce level, filling the mild retracement from the previous week to almost get above the $2700 level.
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 have been skeptical of any upside potential. However this does look interesting if it can break through:
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!