The Circus is now officially in town and with that came a slam back of the USD as tariff talk was walked back a bit, not helped by a holiday on Wall Street, with the less talked about crypto pumping and dumping the better! European shares surged despite the lift in Euro which jumped straight above the 1.04 handle while Yen remained somewhat firm. Meanwhile the Australian dollar also made some inroads and got back above the 62 cent level.
US bond markets were closed while trading in oil was subdued as well with Brent crude retraced back below the $80USD per barrel level. Gold also tried to advance above the $2700USD per ounce level but is still in a holding pattern.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets moved higher at first but failed to advance at the close with the Shanghai Composite stuck just above the 3200 point level while the Hang Seng Index finished 1% higher to almost crack back above the 20000 point level.
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 was setting up for another potential breakdown here as price oscillated downward but has turned into an impressive bounce – can it be maintained?
Japanese stock markets were also able to do better as reactions remain mixed around Yen oscillations with the Nikkei 225 closing 1.1% higher at 38902 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 had some decent gains with the ASX200 lifting nearly 0.5% higher closing at 8347 points.
SPI futures are up slightly without a solid lead from a closed Wall Street overnight. The daily chart pattern and short price action suggests another attempt at breaking through resistance overhead at the 8300 point level next:
European markets were able to make some modest gains across the continent as the Eurostoxx 50 Index closing 0.4% higher to extend well above the 5100 point level, finishing at 5164 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 was closed for the long weekend holiday with S&P500 futures looking to extend tonight above the 6000 point level.
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 but short term resistance has now been cleared with this one off move. The next target to beat is the New Year high as the Trump Circus continues:
Currency markets had been wavering the strong USD mood before the end of last week with King Dollar still dominating since the most recent NFP print but this was reversed sharply overnight as tariff talk was walked back on the first day of the Circus Administration. Almost all the undollars advanced with Euro jumping smartly above the 1.04 level.
The union currency was ready to make new lows in a very oversold condition so this isn’t that surprising as markets re-align but this could be more than a short term resolution as the chaotic volatility that is the White House economic “policy” begins:
The USDJPY pair was unable to hold on to its Friday night gains returning below the 156 handle overnight with Yen firming once more.
Short term momentum has reverted out of extremely overbought settings but is now fully entrenched in negative settings as price seeks the to break below the 155 level but as I warned last week, the potential for a rebound was building here, although it looks to be a dead cat bounce at best:
The Australian dollar is still depressed but it finally found some traction on the USD weakness overnight as it broke full well into the mid 62 cent zone and held there this morning.
The potential follow through to the high 62’s as it almost hits the 200 day moving average (upper black sloping line) indicates some chance of a medium term reversal, but this is high risk going into the live February RBA rate meeting – watch for a rejection at just below the 63 cent level instead:
Oil markets couldn’t continue their breakout from Friday night with Brent crude retracing back below the $80USD per barrel level in a continued welcome pullback after being so overbought.
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 now complete, but needs another breather first as this looks considerably overdone and likely to slip in the coming sessions:
Gold is trying to get back on track but was unable to advance further overnight after recently running out of steam as it finally broke through the $2700USD per ounce 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!