Friday night saw a slightly weaker than expected jobs print from the US – aka the NFP or non farm payrolls – that saw some USD weakness but not across the board while Wall Street slumped again making for a two week low due to tech stocks. Don’t mention Tesla… The Australian dollar is still in a stronger position after almost crossing the 63 cent level but fell back slightly against the USD due to the NFP.
10 year Treasury yields moved higher back again to the 4.5% level while trading in oil saw both markers falling again 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 $2860USD per ounce level.
Looking at stock markets from Asia in Friday’s session, where mainland Chinese share markets have continued their strong bounceback as the Shanghai Composite launches more than 1% higher while the Hang Seng Index also made up lost ground, also closing up more than 1% to 21133 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 reopened after the NY break with the previous monthly highs at the 21500 point level the target to beat:
Japanese stock markets however have fallen back with the Nikkei 225 finishing nearly 0.7% lower at 38787 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 no longer on the cards as resistance is firming. Watch for a potential breakdown below the 38000 point level:
Australian stocks were the worst in the region with the ASX200 closing 0.1% at 8511 points.
SPI futures are down 0.8% on the sharp drops on Wall Street from Friday night, so expect more volatility as the new trading week gets underway. 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. I’m a bit concerned about those negative candlesticks going into the RBA meeting too:
European markets started out in hesitation but eventually fell across most of the continent as the Eurostoxx 50 Index lost more than 0.5% to close at 5325 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 followed suit getting into the NFP print as tech stocks pulled back the most with the NASDAQ losing more than 1.3% while the S&P500 also lost 1% to almost pull back below the 6000 point level at 6025 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 essentially tried to move to a stronger USD as a result of the steady as she goes NFP print on Friday night but it hasn’t been across the board. Euro had one of the bigger reversions as its fell back to the 1.03 handle after failing to push above overhead resistance at the 1.045 level mid week.
The union currency deflated all week before the previous Friday night slam dunk into the mid 1.03 area on the tariff troubles as daily momentum remained to the downside. Short and medium term support is still under threat here and requires a significant move higher or we could see a return to the 1.02 level:
The USDJPY pair is still in a funk with Yen firming stronger again overnight with a return to below the 152 level on Friday night in the wake of the US jobs print.
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 and domestic policies continue to strengthen Yen:
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, with this strength showing through without a major drop on Friday night.
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 again on Friday night, heading back to the $2860 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!