Overnight saw most markets pull back in volatility as they absorbed the latest US unemployment numbers from Friday night’s NFP print which came in softer than expected although USD was able to stabilise somewhat. Wall Street tried to recover but tech stocks dragged it down while European shares also lost momentum. The Australian dollar has retraced to be just above the 66 cent level as traders await the next US CPI print.
10 year Treasury yields rose slightly to finish right on the 4.1% level, while commodities saw a mixed result, with Brent crude again unable to push through the $83USD per barrel level while gold can’t be stopped above the $2100USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets are rising together again with the Shanghai Composite up more than 0.6% while the Hang Seng has advanced more than 1.3% higher to 16571 points.
The daily chart was starting to look more optimistic with price action bunching up at the 16000 point level, ready to possibly make a run for the end of 2023 highs at 17000 but as I warned previously, watch for any retracement down to the low moving average that could presage a full breakdown to the long term trend:
Japanese stock markets however responded poorly, with the Nikkei 225 closing nearly 2% lower at 38820 points.
Trailing ATR daily support was never threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum getting back to overbought readings with a significant breakout. A selloff back to ATR support at 38000 points remains unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here on any volatility, with futures not looking promising this morning:
Australian stocks were nearly the worst in the region with the ASX200 losing 1.8% to close at 7704 points.
SPI futures are flat at best given the poor showing on Wall Street overnight which could mean a sharp fall at the open. The daily chart was looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. As I said previously, watching for any continued dip below the low moving average could see a significant pullback but watch ATR support which has been defended so far:
European markets were again quite hesitant in their first session of the trading week with small losses across the continent with the Eurostoxx 50 Index finishing nearly 0.6% lower at 4930 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum is now well out of overbought phase. This was looking to turn into a larger breakout but watch for these falls below the low moving average or ATR support proper:
Wall Street tried to patch up the Friday night losses following the NFP print with the NASDAQ unable to recover, down more than 0.4% while the S&P500 did a lot better, finishing just 0.1% lower at 5117 points.
The four hourly chart shows a false breakout just before the print that only took out about half of the week’s advances, so not all is lost with price still strongly supported above the 5050 point level with short term momentum firms above 5100 points:
Currency markets remain in anti USD mode following the US jobs print on Friday night but there has been some consolidation and minor retracements with the DXY Index actually up for the day as Euro pulls back to the low 1.09 level.
The union currency has made another new monthly high with a view to getting back to the 1.09 handle as momentum remains overbought in the short term and price action breaking out nicely. Watch for any pullback to the 1.0820 level and any test of the 1.08 handle itself however on a reversion:
The USDJPY pair is trying to find a bottom after last week’s large downisde volatility that saw it break below the 147 level after being stuck above the 150 handle. Last night it stabilised again without making any new session lows without any further economic catalysts.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is obviously very negative as Yen buyers step in but watch for a potential violent upswing through the mid 148 level:
The Australian dollar was unable to continue its bounce from late last week, with a small retracement that is still keeping it above the 66 handle and the early February highs.
The Aussie has been under medium and long term pressure for sometime before last week’s breakout but there signs of normalisation here before the next RBA meeting, but the Pacific Peso has to get through the next US CPI release first:
Oil markets are still failing to regain their December highs with Brent crude again stuck below the recent weekly highs around the $82USD per barrel level as it continues to come up against weekly resistance at the $84 level.
After retracing down to trailing ATR daily support at the $77 level, price is still above the weekly resistance levels that so far have held from the January false breakout with the short term target the late January highs above $84 still the next target:
Gold is still moving higher after some recent deceleration but really wants to keep punching through the $2100USD per ounce level, closing just above the $2180 level overnight following zero reaction to the NFP print on Friday night.
Last week daily momentum was nearly off the charts – never a good sign – with short term support at the $2000 level turning to what could be rock solid medium term support but still the critical area to watch ahead on a likely pullback due to excessive volatility. So far however the four hourly chart looks stable:
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!