A modest bounce on Wall Street overnight due to the weaker than expected CPI print was somewhat overshadowed by the Bank of Canada forced to make another interest rate cut to forestall the effects of the slowing domestic economy due to Trump’s tariffs, while the Canadian government announced another round of targeted counter tariffs alongside the EU, both of which are designed to hit “red” US states. No more Jack Daniels for you! The USD retreated on the CPI print and is just holding on against the major undollars although Euro is still outperforming while the Australian dollar was able to get back above the 63 cent level.
10 year Treasury yields lifted higher, now back above the 4.3% level while oil prices managed a bounce with Brent crude getting back above the $70USD per barrel level. Gold also was able to get out of trouble and jumped back above the $2900USD per ounce level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets have moved a little higher in afternoon trade with the Shanghai Composite up around 0.2% while the Hang Seng Index has pulled back slightly to the 23700 point level.
The Hang Seng Index daily chart shows how this recent move looked unsustainable to the upside after recently setting up for another potential breakdown around the 20000 point level but has brushed this caution aside. Momentum remains overbought after beating the previous monthly highs at the 21500 level but as I warned last week – be cautious here in the face of another reversal:
Japanese stock markets however are on the rise again as Yen weakens with the Nikkei 225 up nearly 0.4% to close at 36919 points.
Price action had been indicating a rounding top on the daily chart for sometime now with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level now in full remission. Yen volatility remains a problem here, with a sustained return above the 38000 point level unlikely although futures are indicating a bounce back:
Australian stocks had the biggest selloff with the ASX200 closing nearly 1.4% lower at 7786 points.
SPI futures are up slightly due to the lift on Wall Street from overnight. The daily chart pattern suggests resistance overhead at the 8500 point level is far too heavy for the market to overcome with short term momentum oversold and ready to go lower:
European markets were able to rebound after a series of falling sessions across the continent, with the Eurostoxx 50 Index finishing nearly 1% higher at 5359 points.
This is setting up for a breakdown with short term support taken out and the ATR support from the recent uptrend now under threat as momentum goes nearly into oversold mode:
Wall Street had a mixed session with the Dow falling back but it was really about one or two tech stocks pushing the NASDAQ edifice higher, up more than 1% at the close while the S&P500 gained nearly 0.5% on the weak CPI print to finish at 5599 points.
The Trump pump and dump scheme is working a treat here as overhead resistance rejected further calls to launch higher above that 6000 points throughout Jan and Feb with momentum now taking the market back to the September 2024 lows and possibly lower. But watch for the bottom pickers here:
Currency markets remain strongly against King Dollar and the weaker than expected US CPI print overnight hasn’t helped as Euro remains strongly above the 1.08 handle after recently extend its new monthly high into the 1.09 level itself.
The union currency surged as the bluffs were called on Trump’s tariffs, with short and medium term support building at higher levels. Momentum was overextended earlier in the week and has now re-engaged to the upside although a potential pullback move is building here:
The USDJPY pair is trying to get out of its funk after a very brief deceleration phase into the early February lows around the 151 level as short term momentum is fighting back with a further push above the 148 level overnight, but it was shortlived after the CPI print:
Short term momentum was extremely oversold before the start of week bounce but required price action to at least get over the 156 level to call this a proper trend higher. As USD weakens structurally overall and domestic policies continue to strengthen Yen watch for another return below the 146 level:
The Australian dollar is trying hard to get back into the swing of things with some recent upper movement around the 63 cent level with some internal strength building helped by the weak US CPI print pushing the Pacific Peso back above.
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 shoot over the 200 day MA (moving black line) with a clear inverted head and shoulders pattern on the daily chart:
Oil markets are trying to get back on track but Brent crude was pushed further down all last week but saw some bounceback overnight as it lifted above the $70USD per barrel level.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways lower action for the latter half of 2024. The potential for a return to the 2024 lows is building here:
Gold has managed to get back above the $2900USD per ounce level overnight after failing to do so on the weekend gap as it tries to brush off the normal correlation with risk assets with a new weekly high in the process.
Price action has always found a lot of resistance just under the $2960 zone so that is the likely target in any upside potential with obvious short term resistance at the $2920 level the area now beaten we could see a steady run higher from here:
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!