By Chris Becker
An explosive press conference with Trump wading in on all kinds of matters sent USD, Treasuries and other markets reeling overnight, as the swamp drainer in chief is making volatility great again. US stock markets hit new highs while the USD Index fell nearly 1.5% against the majors, with the Aussie dollar in particular shooting higher.
First to Asia yesterday where the Shanghai Composite lost nearly 0.8% in a sliding move to its high moving average, finishing at 3136 points. My target for this move once momentum becomes positive remains the former high at 3300 points but I’m watching this setback closely for signs of a reversal:
The Nikkei lifted around 0.3% as the Yen weakened during the Asian session, settling at 19364 points, but failed to make a new daily high again. My target remains the 20,000 point level with a possible pullback as low as 18500 and with Yen surging overnight today’s session could provide that buying opportunity:
Local shares seem to be running out of puff as the impressive rally in the ASX200 from its Christmas origins stalled above local resistance at 5750 points. SPI futures are indicating a flat open again this morning, with the Aussie dollar nearing 75 cents this could be too much for the domestic market. Watch the high moving average here to hold on to profits:
On to Europe, where stocks were mixed, no losses but a few scratch sessions with only the FTSE and DAX putting on gains. The latter rose 0.5% in a solid session, making a new daily high and providing impetus for this rally to continue to 12000 or higher:
While not providing any detail of the fiscal stimulus at his press conference, the Trump effect was in force on US stocks overnight with new highs all round and bull markets full in force. The S&P500 lifted 0.3% and while no new high on the four hourly chart below, there are signs we could see overhead resistance at 2276 points breached soon. I’m watching ATR support here at 2256 points to hold:
On to currencies, where the volatility was superb for late night currency traders as Trump flumped at the stump. Pound Sterling slid down to the 1.20 handle before zooming back up to almost 1.23 against USD before stabilising here at the 1.22 handle proper. What to make of this? Well for now USD is under pressure without a clear fiscal stimulus guideline so expect volatility to continue:
Similar moves in Euro which traded in a near 200 pip range in only a few hours overnight. The picture is a little clearer here with the bulls on the side of the union currency for now. If it can break through the 1.06 handle proper, there is more potential upside here:
Yen meanwhile is facing the double whammy of weak USD and safe haven trade, as it too slumps before recovering to weak support at 115.50 on the USDJPY pair. This will be the currency to watch today in Asian tradE:
The Aussie dollar is loving the Trump Effect and had a big meltup overnight, bouncing above its high moving average and heading straight through the 74 handle against USD. The 75 handle area which corresponds to the 2016 highs is the target here but as I’ve been saying for awhile should require good news locally and no negative events – like strong US data – externally, but maybe this doesn’t matter any more!
Oil finally showed some signs of life as USD cratered last night with the WTI marker lifting swiftly up through the $52USD per barrel level. If this holds we need to see a return to above the daily trendline on the left before going long again:
And to gold, which like the Aussie dollar is continuing its own meltup, lifting to $1192USD per ounce in a volatile session overnight, making another new daily high. As I mentioned previously, the $1200 level is very strong resistance and if breached we could see a big run up to $1350-$1400, the 2016 highs:
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)
BOJ/Abenomics: Bank of Japan, economic policy/direction enacted by PM Shinzo Abe
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!