Well here it is, you get a tariff – he gets a tariff – she gets a tariff – we all get tariffs! Australia was let off mildly by the Trump regime’s new tariff crusade but as they don’t understand, its all interconnected with the near 50% tariffs on Chyna about to devastate not only the domestic US economy (which buys, let me check my records – yes most of its consumer goods from Chyna!) but also the Aussie economy. Currency volatility was epic as expected but has since calmed down although King Dollar has not been pushed off its bloated throne just yet, while Wall Street was doing well and closed higher but stock futures are down more than 2% with a strong selloff expected here in Asia. The Australian dollar was hit relatively hard and has given up all its recent gains to be down at the low 62 cent level.
10 year Treasury yields were up shortly before the tariff announcement to the 4.2% level while oil prices have reversed slightly out of their recent breakout with Brent crude declining back to the $73USD per barrel level. Gold remains the standout after making new record high above the magical $3000USD per ounce level, but pulled back slightly to the $3100 level overnight.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were largely unchanged with the Shanghai Composite steady at 3350 points while the Hang Seng Index also finished steady at 23206 points.
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 and is moving into the negative zone with support firming at the 22000 point level:
Japanese stock markets are failing to stabilise after slumping in the previous session with the Nikkei 225 closing 0.2% higher at 35725 points but this may not be enough as the Trump tariffs start to take effect on sentiment.
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 still unlikely with futures indicating big losses on the open this morning:
Australian stocks were barely able to close higher with the ASX200 finishing just 0.1% higher at 7934 points.
SPI futures are up nearly 0.5% but this is before the announcement of the tariffs so we could do a precipitous drop in line with current S&P futures this morning. 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 oversold with price action setting up a nice dead cat bounce here. Watch for a potential return to the 7700 point level in the aftermath:
European markets were unable to stop selling again with some mild losses across the continent with the Eurostoxx 50 Index finishing down 0.3% to 5303 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 with this overshoot now coming to pass. Watch however for support to firm at the previous monthly support levels (black line) at 5100 points which must hold:
Wall Street had a relatively calm session before the tariff announcement after the close with the NASDAQ up nearly 0.9% again while the S&P500 eventually closed 0.6% higher at 5670 points.
However, the Trump pump and dump scheme is back in business yet again as the tariff announcements were made with a bigly reversion sending both futures contracts down between 2 and 3% with further falls likely. This is going to get rough!
Currency markets were waiting in anticipation for the Trump regime’s tariff tirade and here we are with some surprising and not so surprising results as Euro fared the best before Pound Sterling took over while Yen firmed strongly later in the session.
The union currency spiked up through the 1.09 handle before retracing back down to the 1.08 level swiftly and is likely to oscillate around that level in the coming session. Momentum was fairly neutral in the short term but this is looking overextended for now:
The USDJPY pair rolled over quicksmart as the tariffs were announced early this morning, currently breaching the 149 level and matching the start of week lows with the potential to overshoot here.
Short term momentum was extremely oversold before the start of week bounce but USD is finally weakening as expected here so we could see a more sustained run lower as Yen firms dues to internal inflation troubles:
The Australian dollar had a wild ride like other undollars but is facing a lot of headwinds here early this morning, giving back all its recent small gains to be back at the mid 62 cent level again.
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 with price action having breached the 200 day MA (moving black line) which has now turned into resistance. Short term momentum is now inverting as this looks depressing for the Pacific Peso:
Oil markets had finally broke out as they made positive headway all last week but the brakes are on as the Trump tariffs hit hard with Brent crude initially receding to the $73USD per barrel level overnight.
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 was building here, but buying support is winning out here after the tariff shocks, but how long can that last:
Gold is holding steady amid the volatility after making new record highs as it remains above the $3100USD per ounce level.
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 short term support to hold at the $3100 level with the potential to springboard from here on USD weakness:
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!