A better night on Wall Street due to better earnings reports and by absorbing the Canadian general election outcome. The USD was able to push back slightly against most of the majors although Pound Sterling remains at a new three year high amid the growing UK/EU detente on trade. The Canadian Loonie firmed slightly on the Liberal win while the Australian dollar is losing ground as iron ore prices fall, slipping below the 64 cent level against USD.
10 year Treasury yields are also slipping again with a move back below the 4.3% level while oil prices are falling sharply after failing to build support with Brent crude pushed below the $63USD per barrel level. Meanwhile gold is trying to recover as it steadies above the $3300USD per ounce level amid general USD weakness.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets are slightly lower going into afternoon trade with the Shanghai Composite retreating below the 3300 point level while the Hang Seng Index has pulled back slightly to remain above the 22000 point level.
The Hang Seng Index daily chart shows a classic dead cat bounce setup following the collapse below the 20000 point level, with the rollover not yet in place despite the trade war with the US. This looks like a potential rally if traders can believe the headlines but needs to firmly move above the 22000 point area to clear local resistance:
Japanese stock markets are having yet another holiday with Nikkei futures indicating a likely positive re-open.
Price action was also displaying a classic dead cat bounce pattern but daily momentum has been able to get back into positive readings and is now challenging resistance at the 36000 point level:
Australian stocks have managed a very solid session with the ASX200 up nearly 1% at 8070 points.
SPI futures are indicating another small rise on the open due to the better session on Wall Street overnight. The daily chart pattern suggests further downside could be inevitable as the Chinese counter-counter tariffs take effect but watch for a potential short covering rally past the 8000 point level first with resistance at the 8200 the real level to beat:
European markets wavered in their rebound overnight with only the German DAX advancing as peripheral markets absorbed the Spanish blackout mess, with the Eurostoxx 50 Index closing nearly 0.2% lower at 5161 points.
Support at the previous monthly support levels (black line) at 5100 points failed to hold so 2024 lows at the 4400 point level are still in sight, but there maybe life yet in this dead cat bounce:
Wall Street had a positive night due to some good earnings with the NASDAQ and the S&P500 both advancing more than 0.5% each with the latter closing at the 5560 point level.
This was not looking good as the short term and medium term charts are pointing to a resumption of selling back below the 5000 point psychological barrier as the tariff impacts start to make themselves felt in earnings but this market is still beholden to literal fake news about tariff “deals”:
Currency markets are still trying to understand fact from fiction but the USD bid is starting to dwindle a little although Euro couldn’t sustain its recent small breakout above the 1.14 level while Pound Sterling remained at a new three year high.
The union currency was pushed back down to the 1.13 handle last week as we watch for support to bounce back at the 1.12 level which corresponds to the 2023 and 2024 highs:
The USDJPY pair recently dropped sharply down to the 142 level but has since steadied there overnight but remains on the ropes as of this morning as Japanese traders return from their holiday.
Watch for any sustained break below the 139 level next which completes a multi year bearish head and shoulders setup that could see the 110 to 120 level revisited:
The Australian dollar was previously slowly extending its gains above the 64 cent level to extend above the pre-tariff announcement levels, but has pulled back again below that level in another unsure session overnight.
Stepping back for a longer point of view (and looking at the trusty AUDNZD weekly cross) price action has crossed back above the 200 day MA (moving black line) after bouncing off a near new five year low. This is all about the USD, not the Australian economy so I’m wary here but you’ve got to follow price, keeping an eye on temporary support at the 63 cent level:
Oil markets are trying hard to hold onto its post tariff pause bounce but are facing other geopolitical ructions with Brent crude pushed down towards the $63USD per barrel level to almost make a new weekly low.
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 still building here as domestic demand in the US is likely to collapse despite the very short term change in sentiment:
Gold pulled back somewhat on Friday night after sharply moving higher in recent weeks as it got way ahead of itself at least on the short term charts but is now trying to make another more sustained effort above the $3300USD per ounce level but had a very flat session overnight.
Short term support had firmed immensely in recent sessions showing real strength but momentum became considerably overbought so this was inevitable as price action has reverted back to the uptrend line from the April lows. There is further support at the $3200 level that could be tested next on the overshoot:
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!