Friday night saw a very hesitant risk complex trying to digest the recent Bank of England and Swiss Central Bank meetings, while trying to anticipate what the Fanta Fuhrer in the Oval Office is going to do next with tariffs. Wall Street initially pulled back slightly in line with European stocks before rebounding later in the session while the USD was pushed from pillar to post but eventually led a a broader selloff again Euro and Pound Sterling. Meanwhile the Australian dollar was unable to hold above the 63 cent level as pressure builds on the Pacific Peso.
10 year Treasury yields were up slightly to finish above the 4.2% level again while oil prices continued their follow through on their recent bounceback with Brent crude staying above the $72USD per barrel level. Gold suffered a minor setback following its move above the magical $3000USD per ounce level but managed to recover to hold at the $3020 level.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets fell back sharply in afternoon trade with the Shanghai Composite down more than 1.3% while the Hang Seng Index also lost a lot of ground, down 2% to close at 24360 points as expectations of more stimulus failed to realise. 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. Momentum has retraced from being well overbought after beating the previous monthly highs at the 21500 level:
Japanese stock markets also saw little action as they absorb the BOJ and FOMC meetings with the Nikkei 225 steady at 37677 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 with futures are indicating a small pullback:
Australian stocks were the best in the region but it was all relative as the ASX200 closed just 0.2% higher at 7931 points.
SPI futures are down nearly 0.6% despite the better showing on Wall Street on Friday night. The daily chart pattern suggests entrenched resistance overhead at the 8500 point level is far too heavy for the market to overcome with short term momentum somewhat oversold as price action stalls out here:
European markets were unable to to continue their moves higher across the continent with the Eurostoxx 50 Index finishing 0.5% lower at 5423 points.
This was setting up for a breakdown with short term support taken out and the ATR support from the recent uptrend now under threat as momentum went into oversold mode but I still contend looks like another launching pad to buy more European defense stocks as they decouple from Wall Street:
Wall Street also stumbled but managed to escape with only minor gains with the NASDAQ up 0.5% while the S&P500 gained just 0.1% to close at 5667 points.
The Trump pump and dump scheme is still working somewhat here 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. The dead cat bounce may be over in the short term however:
Currency markets are wavering in their anti King Dollar mood amid the SNB cut and the BOE “hold but looking to cut” response to the growing trade wars with most undollars falling again on Friday night against USD. Euro is particular gave up a lot of ground and fell back to the 1.08 level, almost breaking weekly support.
The union currency is barely holding on despite the tariff trade war with short and medium term support building at higher levels. Momentum was overextended earlier in the week and has now flipped to oversold setting so watch for the 1.08 handle to come under pressure here:
The USDJPY pair broke down substantially on the BOJ aftermath last week with a fall back below the 149 but it has managed to clawback most of those losses to return above the 149 handle but not yet exceed its previous intraweek high.
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 a potential return below the 146 level if the current resistance levels aren’t taken out:
The Australian dollar is failing to get back into the swing of things and while we saw some life above the previous weekly high point its now retracing well below the 63 cent level amid the rate cut/dovish mood around most central banks last week, sliding back to the weekly low 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 although price action has now breached the 200 day MA (moving black line) which could turn into resistance:
Oil markets are finally getting back on track as Brent crude broke out of its funk in the previous session to make headway above the $72USD per barrel level albeit in very early stages of a breakout.
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, although news that the Ruzzians are facing more refinery attacks from the Ukrainians could see more buying support:
Gold had a small hiccup on Friday night but is holding above the $3000USD per ounce level with the run up to the $3050 level stalling due to being very over stretched.
Price action has always found a lot of resistance just under the $2960 zone so that was the likely target in any upside potential but that has been deftly pushed aside without any substantial pullback thereafter, finding a very solid bid up here at new historic highs. Watch for support to hold at the $3000 level:
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!