Overnight saw the complete market reaction to the weekend near miss events with European markets pulling back while US stocks lifted slightly as bonds sold off on the long end of the curve. The absence of economic events was highlighted by moves to currencies on the words of Fed Chair Powell with the USD moving higher against almost everything. The Australian dollar lost some ground but remains somewhat firm in comparison to Kiwi as it holds above the 67 cent level to stay near its six month new high.
US bond markets saw some volatility as 10 year Treasuries yields lifted slightly back to the 4.23% level. Oil prices are trying to stabilise but both WTI and Brent crude fell back slightly, the latter sticking around the $85USD per barrel level while gold prices pushed back above the $2400USD per ounce level despite the strong USD.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were flat in reaction to the GDP print with the Shanghai Composite up only a handful of points while the Hang Seng Index was down nearly 1.5% to 18025 points.
The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session as it tried to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. Price action looked like turning this falling wedge pattern into something more bullish but is looking like a dead cat biounce instead:
Meanwhile Japanese stock markets were closed for a holiday with Nikkei 225 futures indicating a calmer pullback from the overextended price action from last week.
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. Short term resistance had been defended with price action now pushing right through resistance at the 39000 point level with momentum very overbought as this breakout gets going, with futures are indicating a pullback:
Australian stocks however kept rising with the ASX200 wanting to get up through the 8000 point level, closing some 0.8% higher to 7959 points.
SPI futures however are flat despite the higher moves from Wall Street overnight. The daily chart was showing a potential bearish head and shoulders pattern forming with ATR daily support tentatively broken, taking price action back to the February support levels in mid April. Momentum is now well out of its oversold condition with this breach of the 8000 point level possibly coming up against significant resistance:
European markets couldn’t maintain their positive mood from last week with solid losses across the continent as the Eurostoxx 50 Index closed more than 1.1% lower to return below the 5000 point level, finishing at 4983 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance still looming at the 5000 point barrier. Former ATR support at the 4900 point level looks like the anchor point and so far has held here:
Wall Street continues to be supported by tech stocks in the main but while the NASDAQ was up 0.4% the S&P500 closed just 0.2% higher, not yet finishing above its recent record high.
The four hourly chart showed resistance overhead that had been tested last Friday before an early week slump that has now been tested and broken through, helped alongside a soaring NASDAQ. Momentum was somewhat overbought but has retraced slightly so we could see a continued volatile start to the trading week tonight if further earnings disappoint, but it seems all eyes are firming towards Trump 2.0:
Currency markets had been coming back against a dominant USD well before the dual CPI and PPI prints with almost all the undollars performing well except Kiwi. This has changed over the weekend as risk markets firm more towards a Trump election in November with Euro pulling back alongside Pound Sterling to give up some gains.
The union currency had previously bottomed out at the 1.07 level before gapping higher earlier in the week with more momentum now building to the upside with the 1.0750 mid level to act as support going forward, but watch the low moving average here in the short term to come under pressure:
The USDJPY pair still looks dire here on the potential BOJ intervention that has seen a thumping in Yen before the PPI print with a 400 pip downside move from the 161 handle to just below the 158 level, which has been confirmed on Friday night.
This volatility speaks volumes as it once pushed aside the 158 level as longer term resistance, but then was unable to breach the 162 level as it looks like the BOJ intervention finally worked on the ever weakening Yen:
The Australian dollar is struggling to make further gains after breaking out of its holding pattern as the USD firmed overnight. While still well supported above the 67 cent handle from Friday night at a new six month high as sentiment shifts more towards the RBA raising, short term support is coming under threat here.
During June the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone but that has changed in recent weeks with price action finally getting out of the mid 66 cent level that acted as a point of control. This move looks much more convincing with the potential to go higher as speculation of a rate hike in August building, but I’m watching short term support here which could come under pressure:
Oil markets are trying to stabilise after getting out of correction mode with Brent crude retracing slightly below the $85USD per barrel level overnight.
After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Watch daily ATR support here at the $86 level which is still broken and will likely be resistance for sometime with short term momentum now retracing out of overbought mode:
Gold is still trying to hold on to its breakout from late last week and its post CPI breakout and has held above the $2400USD per ounce level to make a new high with support seemingly strong at that level.
While it was the biggest casualty of the reaction to the US jobs report, the shiny metal had consistent negative short term momentum that has now turned around with upside resistance at the $2400 level finally broken. The longer term support at the $2300 level was key so this should support further gains if the USD remains weak:
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!