Following the Fed, the ECB meeting last night saw another rate cut which helped boost European stocks and pushed the USD higher until the latest US GPD print which missed slightly, upsetting some expectations. Toss in a bit of Apple earnings and other tech volatility and Wall Street basically came out on top but we could get a wobbly final session here in Asia. Continued Trump Tariff Tossing saw the crosses move around especially the Loonie while the Australian dollar is still plumbing the depths of the low 62 cent level on the interest rate differential.
10 year Treasury yields fell back in line with Euro bonds to the 4.5% level while trading in oil was again weak with Brent crude now breaking below the $76USD per barrel level as its corrective phase gathers pace. Gold however made a new all time historical high to almost finish above the $2800USD per ounce level.
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 were the weakest in the region again with the Nikkei 225 closing just 0.1% higher at 39480 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 a much better bid the ASX200 closing 0.5% higher at 8493 points.
SPI futures are indicating a much better start on the open despite the uneasy finish on pullback 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 with momentum now getting quite overbought:
European markets were able to make some strong gains across all of the continent as the Eurostoxx 50 Index lifted nearly 1% and shot almost shot above the 5300 point level, finishing at 5282 points, helped along by an accommodative ECB.
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 diverged slightly due to tech stock volatility with the NASDAQ having a scratch session while the S&P500 lifted nearly 0.7%, finishing at 6081 points.
Price action had all the trademarks of a continuation below the 6000 point support level as there’s the potential to overshoot and overreact to the FOMC meeting going into the NFP print next week. This should set up a rally into the 6200 point area:
Currency markets have a lot to absorb amid the volatility around the Trump Tariff and isolationist madness with successive central bank meetings with the ECB last night pushing USD around at least against Euro while the crosses went a bit wild on the tariff talk. Euro at first jumped above the 1.04 level but managed to pull back later this morning for almost no change.
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 which could be ominous:
The USDJPY pair broke down earlier in the week from its weak Friday night hold over the weekend gap and was unable to arrest this decline overnight amid the ECB meeting to flop back down to the 154 level.
Short term momentum was extremely oversold before the start of week bounce back but this looks to be a truly dead cat 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 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 still in a proper retracement with Brent crude finishing right on 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 however is back on track after recently running out of steam trying to breach the $2800USD per ounce level last week with another proper go at it overnight, almost closing above the key level in a very strong move.
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 as the previous weekly high is now surpassed although momentum is quite overbought:
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!