The Federal Reserve meeting overnight eventually sent the USD down significantly against the majors, lifting equities, while bond yields eventually finished largely unchanged as markets absorbed the language and tenor of the almost non-result. Wall Street pushed up to a new record high and its looking good for shares here in Asia on the open.
The US Dollar Index was down more than 0.3% for the session with Euro able to recover from its retreat below the 1.09 handle while the Australian dollar also jumped more than 50 pips but still failed to get back above the 66 cent level.
10 year Treasury yields pulled back slightly from their four month high but then stabilised, while Brent crude pulled back to just above the $86USD per barrel level. Meanwhile gold got back on track and then some to rise above the $2180USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets tried to get back on track with the Shanghai Composite rising sharply in late afternoon trade, up more than 0.5% while the Hang Seng was basically treading water to close just 0.2% higher at 16559 points.
The 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 trying to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. However this has been thwarted as monthly resistance levels are kicking in:
Japanese stock markets were the big movers again with the Nikkei 225 closing more than 0.6% higher at 40006 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. Last week saw this reversed as momentum goes negative and the selloff back to ATR support at 38000 points taking the wind out of this trend. This reversal has given new life here however:
Australian stocks were the odd ones out with a slight loss yesterday, as the ASX200 retreated 0.1% to close at 7695 points.
SPI futures are up more than 0.6% as they follow the solid showing on Wall Street overnight. 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 unable to bounce back as confidence was missing somewhat across the continent, with the Eurostoxx 50 Index finishing 0.1% lower at 5000 points exactly, while futures surged higher after the session close.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly of overbought phase. This is looking to turn into a larger breakout as futures indicate a new high for tonight’s session:
Wall Street continued its upbeat mood and surged forward again with the NASDAQ up more than 1% while the S&P500 finished nearly 0.9% higher, closing at 5178 points.
The four hourly chart shows a fantastic 2024 trading season so far even it if looks slightly overcooked, with the Fed basically giving the go ahead for more upside from here, but momentum is extremely overcooked to say the least:
Currency markets saw the most volatility overnight in the wake of the Fed meeting, with an initial reversal that turned into a wider move with all the majors turning against King Dollar. Euro led the charge with a break back above the 1.09 level to reverse its new weekly low but still a bit shy of its recent highs at the mid 1.09 level.
The union currency was weakening significantly before the meeting but had found somewhat of a bottom at the 1.0830 level but this move will give it further momentum in the latter half of the trading week where the next target is the former weekly high above 1.0950 or so:
The USDJPY pair had recovered all of its downside volatility from the previous weekly reversal before the Fed meeting and had made a four month high, with only a minor reversion overnight keeping it above the 151 handle.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now well into overbought mode while ATR resistance has been swept aside in this bounceback. I remain cautious of a potential pullback here as its been a little too much, too fast:
The Australian dollar fell below the mid 65 cent level following the dovish RBA meeting but this was reversed as it bounced off support at the 65 handle proper.
The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while this surge looks strong, it still isn’t overbought on the four hourly chart and hasn’t surpassed support from last week’s consolidation phase. Watch for the 66 cent handle to firm as resistance here:
Oil markets are pausing their breakouts following the attacks on Russian refineries with Brent crude pushed slightly lower overnight to settle just above the $86USD per barrel level, still well above the previous weekly highs.
After retracing down to trailing ATR daily support at the $77 level, price had been bunching up around the February highs at the $84 level with short term momentum definitely overbought and signalling potential upside from here:
Gold finally got out of it stuck phase after some recent deceleration, surging well above recent session highs to almost make a new high at the $2180USD per ounce level in the wake of the soft Fed meeting outcome overnight.
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:
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!