The latest BOE meeting saw an expected cut which buoyed European markets coupled with a resurgent Yen and hesitation around tonight’s NFP print kept the USD in a weak space overnight. Wall Street made modest gains as earnings season ramps up with Amazon in focus while the latest crude oil figures suggest a glut in supply. The Australian dollar is now in a much stronger position to almost cross the 63 cent level after almost crashing below the key 60 handle at the start of the week gap action.
10 year Treasury yields pulled back again to the 4.4% level while trading in oil saw both markers dropping nearly 2% as Brent crude finished below the $75USD per barrel level. Gold failed to continue its push higher as it gave back some recent gains to finish below the $2850USD per ounce level.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets have bounced back with vigour as the Shanghai Composite shoots more than 1% higher while the Hang Seng Index has also made up lost ground, closing more than 1% higher to 20891 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 was setting up for another potential breakdown here as price oscillated downward but has turned into an impressive bounce and looks like continuing as markets reopen:
Japanese stock markets were also able to clawback some recent losses despite the higher Yen, with the Nikkei 225 finishing nearly 0.6% higher at 39056 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 in the region with the ASX200 closing 1.2% higher at 8520 points.
SPI futures are down 0.2% despite the somewhat good moves on Wall Street overnight so expect more volatility in today’s session. 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 once overbought but now steady:
European markets were very positive across most of the continent as the Eurostoxx 50 Index gained more than 1.6% to close at 5356 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 picks up strongly here with the 5000 point level turning into very strong support:
Wall Street’s rebound looked set to continue but again tech stocks pushed the NASDAQ around, up only 0.4% while the S&P500 lifted just 0.1% to stay above the 6000 point level at 6067 points.
Price action had all the trademarks of a continuation below the 6000 point support level as the potential to overshoot and overreact to the FOMC meeting going into the NFP print tonight is building. This should have set up a rally into the 6200 point area but could the first stage of a pump and dump scheme although overhead resistance is weakening:
Currency markets were buoyed by the BOE cut and a weaker USD across the board due to pricing in of tonight’s NFP print with the USD Index again falling back. Euro filled in most of its very short term dip to almost get above the 1.04 level overnight but there are short term signs of exhaustion setting in here before the NFP print.
The union currency recently found overhead resistance at the 1.05 handle but has deflated all week before the Friday night slam dunk into the mid 1.03 area as momentum accelerates to the downside. Short and medium term support is still under threat here and requires a significant move higher before calling this over:
The USDJPY pair is accelerating in its falls with Yen firming stronger again overnight with a break below the 152 level this morning before the Tokyo open.
Short term momentum was extremely oversold before the start of week bounce but requires price action to at least get over the 156 level to call this a proper trend higher for USD and this hasn’t come to pass as USD weakens structurally overall:
The Australian dollar was one of the biggest casualties of the trade war as the Pacific Peso gapped down to the 60 handle but has now steadied very strongly back at its previous weekly highs to form a solid bottom pattern, again almost crossing the 63 level this morning.
The recent follow through to the high 62’s and low 63’s was always high risk going into the live February RBA rate meeting and after the Trumpian tariff crusade so watch for a rejection of medium term support at the mid 61 cent level although this bounceback could shot over the 200 day MA (moving black line):
Oil markets are now in flux due to the energy war with China as both WTI and Brent crude had more selloffs, the latter finishing well below the $75USD per barrel level with support too weak to hold back the selling tide.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways action for the latter half of 2024. The potential for a new rally to form above the $77USD per barrel level from here is dwindling as recessionary fears mount:
Gold however wants to continue its surge above the $2800USD per ounce level but its recent run has stalled somewhat overnight, heading back to the $2850 level after almost crossing $2890 level mid week.
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!