While Wall Street nominally almost made a record close on Friday night it was a very weak finish that reflected a missed retail sales print that showed spending has slowed in the first month of the year. Other risk markets also pulled back and combined with a flurry of central bank meetings this week, trading maybe muted for the first session today. The USD gave up ground against most of the undollars with a swing back to Yen strength while the Australian dollar pushed and stayed above the 63 cent level for a new monthly high although tomorrow’s RBA meeting will bring the volatility.
10 year Treasury yields fell back another 5 points on the retail sales print to well below the 4.5% level while trading in oil was muted but weak as Brent crude fell back below the $75USD per barrel level. Gold was the standout by snapping back below the $2900USD per ounce level after being overextended all week.
Looking at stock markets from Asia in Friday’s session, where mainland Chinese share markets were able to re-engage their strong bounceback with the Shanghai Composite pushing 0.4% higher in afternoon trade to remain above the 3300 point level while the Hang Seng Index has made a huge surge, closing nearly 4% higher at 22620 points.
The Hang Seng Index daily chart shows how this recent move looks very unsustainable to the upside after recently setting up for another potential breakdown around the 20000 point level. Momentum is extremely overbought after beating the previous monthly highs at the 21500 level so I’d be very cautious here:
Japanese stock markets reacted to the overnight rise in Yen with the Nikkei 225 falling more than 0.7% to close at 39149 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 the support level that must be supported for another run higher:
Australian stocks had a modest session due to some mixed earnings reports with the ASX200 closing just 0.2% higher at 8555 points.
SPI futures however are down nearly 0.7% due to the mixed finish on Wall Street from Friday night. 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 but watch out for a breakout here as Trump’s bluff is called yet again:
European markets have done very well in recent weeks but are starting to slow down with the Eurostoxx 50 Index retracing nearly 0.2% on Friday night to close below the 5500 point level.
This has the hallmarks of a rally that is running out of steam although daily momentum is overbought its not quite at extreme readings yet. Daily candlestick analysis shows some buying exhaustion setting in however, so watch for any inversion on the re-open this week:
Wall Street looks like it wants to make 2025 great again but the results are getting quite wobbly as the NASDAQ lifted 0.4% while the broader S&P500 finished dead flat at 6110 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 are reacting to the death knell of American trade order by putting the USD in its place, lifting across the board on the weak retail sales print with the Euro almost getting above the 1.05 level on Friday night.
The union currency was looking weak at the start of last week but surged as the bluffs were called on Trump’s tariffs, with short and medium term support building after being under threat. Momentum is overextended and we could see some stabilisation through a gap down to the mid 1.04s on the open on Monday:
The USDJPY pair tried and failed to get out of its funk with Yen pulling it back to reality yet again on Friday after a too fast resurgent move up towards the 154 handle now thwarted back below the 153 level.
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 is surprisingly strong in the wake of continued tariff threats but its really about more USD weakness with volatility around the 63 handle turning into an outright breakout on Friday night as short term momentum gets very overbought.
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 although this bounceback could shot over the 200 day MA (moving black line) with a clear inverted head and shoulders pattern:
Oil markets are heating up again although both WTI and Brent crude were not able to stabilise on Friday, the latter falling back to its previous daily lows below the $75USD per barrel level after its recent sharp reversal.
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 wants to continue its surge above the $2900USD per ounce level but was overextended through the latter half of the week and snapped back to short term support at the $2880 level as a result.
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!