Wall Street rebounded overnight from its Deepseek AI start of week dramas with tech stocks rebounding while other industrials were largely unchanged as they absorbed the latest macroeconomic news in the US and await the next FOMC meeting. FX markets were largely unmoved as well, absorbing the post weekend volatility and even more Trump Tariff nonsense – this time Taiwan is in the orange headlight. The USD was able to fight back mainly against Euro which retreated from the 1.05 handle while Yen took a small breather. Meanwhile the Australian dollar has broken out of its holding pattern to slump back down to the 62 cent level.
10 year Treasury yields settled down overnight with a small blip higher at the 4.5% level while trading in oil was again weak with Brent crude hovering around the $76USD per barrel level as its corrective phase gathers pace. Gold managed a small fightback to get back above the $2750USD per ounce level after retracing from near the $2800 level on Friday.
Looking at stock markets from Asia in yesterday’s session, where mainland share markets were closed for the Chinese New Year.
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 are the weakest in the region by far with the Nikkei 225 closing more than 1.5% lower at 38926 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 able to escape mass carnage with the ASX200 closing just 0.1% lower at 8399 points.
SPI futures are indicating a better start with a 0.4% lift on the open given the rebound on Wall Street overnight. The daily chart pattern and short price action suggests resistance overhead at the 8300 point level is starting to weigh on the market with a big push through required soon to get back to the 2024 highs:
European markets were able to make some minor gains across the continent as the Eurostoxx 50 Index gained nearly 0.2% but managed to not get back above the 5200 point level, finishing at 5198 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 5000 point level turning into very strong support:
Wall Street rebounded from the Deepseek AI drama as the NASDAQ took back a little more than 2% while the S&P500 pushed up more than 0.9% to finish at 6067 points.
Price action had all the trademarks of a continuation below the 6000 point support level but there’s life left in this dead cat with a possible follow through back to the previous high as we await the FOMC meeting:
Currency markets are seeing a mild resurgence in USD strength although it is somewhat isolated as traders await the next FOMC meeting amid the volatility around the Trump Tariff and isolationist madness against Europe. Euro pulled back slightly after nearly getting back above the 1.05 level and making a new weekly high, finding support at the 1.0430 level.
The union currency is holding on to this uptrend and although there is some overhead resistance momentum remains in overbought mode. Watch for a potential reversal here on any close below the 1.0430 level in the short term:
The USDJPY pair broke down from its weak Friday night hold over the weekend gap but is seeing another reprieve overnight that saw it return to the mid 155 level.
Short term momentum was extremely oversold with this bounce back fairly obvious but it remains to be seen if this is probably a dead cat bounce at best as the weak USD meme is entrenched here:
The Australian dollar is still depressed in the medium term as it retraced back down to the 62 cent zone overnight as it continues to selloff so far this truncated trading week leading up to the RBA meeting next week.
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 are now in a proper retracement after failing to continue their breakout with Brent crude retracing back down to the $76USD per barrel level in a continued pullback after being so overbought in recent weeks.
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 was able to get slightly back on track after recently running out of steam as it finished just above the $2760 level overnight.
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 is looking more interesting:
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!