Overnight finally saw a strong session for Wall Street following recent solid domestic data as dovish comments from the ECB helped increase risk sentiment even though the USD was basically unchanged against the majors as Yen firmed. The Australian dollar still struggling as it failed to make any headway above the 65 cent level again.
10 year Treasury yields fell slightly below the 4.2% level, still a little off of their four month high, while Brent crude steadied to return above the $85USD per barrel level. Meanwhile gold is picking up pace as it wants to return above the $2200USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets are failing to make a comeback with the Shanghai Composite plunging more than 1% lower while the Hang Seng followed suit, closing nearly 1.5% lower at 16372 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 rebounded however, with the Nikkei 225 almost closing 1% higher at 40762 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 middle of the road performers following the monthly CPI print with the ASX200 closing 0.5% higher at 7819 points.
SPI futures are looking boisterous with a near 0.8% rise following 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 again better across the board with the German DAX helping push the Eurostoxx 50 Index higher, eventually finishing up 0.3% to 5081 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly out of an overbought phase. This is looking to turn into a larger breakout as futures indicate another rise for tonight’s session:
Wall Street got back on track overnight with some good results sending NASDAQ up by 0.5% while the S&P500 gained nearly 1%, closing at 5248 points.
The four hourly chart shows this slight consolidation back to a more sustainable uptrend with short term support coming up soon while short term momentum gets out of a temporary negative setting to overbought, almost matching last week’s highs:
Currency markets saw the most volatility last week in the wake of the BOE and Swiss meetings, with almost no volatility overnight on the dovish ECB signalling, with a minor push against Euro as USD remained unchanged. Euro had tried to buck the trend earlier in the week with a small breakout above the 1.08 level on a falling wedge pattern but this has failed with nearly a full return to the start of week lows.
The union currency seems to have support anchored at the 1.08 level which is where it ended up but the short term price action is now suggesting a return to that level given that short term momentum is nowhere near positive yet:
The USDJPY pair was unable to make any gains despite the rising USD overnight as Yen firmed instead with a minor retracement back to the 151 level overnight.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now trying to get back into overbought mode while ATR support remains firm at the 150 handle proper:
The Australian dollar wanted to return to its weekly highs but failed again with a pullback to short term support and below the 66 cent level as it now dices with longer support at the 65 cent area.
The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while this surge looked strong, it wasn’t overbought on the four hourly chart and had not surpassed support from last week’s consolidation phase. Watch for the 65 cent handle to firm as support here after yesterday’s monthly CPI print:
Oil markets are pausing their breakouts following the attacks on Russian refineries with Brent crude pushed slightly higher to settle just below 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 had previously surged above the $2200USD per ounce level in the wake of the soft Fed meeting outcome and is trying hard to return back to that level with another positive session overnight to close just below $2195USD per ounce.
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!