By Chris Becker
Rate cut? What rate cut? The Aussie dollar shined overnight, rallying on the RBAs rate cut, but it was risk off everywhere else. Stocks in the US and Europe dropped through significant support as WTI oil dropped below $40USD per barrel amid some serious growth concerns. The usual suspect safe havens of Yen and gold were the places to be as we head into the latter half of the week, building to the game changing NFP print on Friday night.
Recapping Asia’s session yesterday where the Shanghai Composite looked like it was ready for a broad selloff, but recovered after the long lunch break to finish up 0.6% to just above 2979 points. Again, still below the critical support level of 3000 points with no real buying support as it chugs along under the 200 day moving average:
Can we call a top for the ASX200? The rate cut had the opposite effect on the local bourse yesterday, falling nearly 1% to 5540 points. Again, the financials are pointing the way, unable to breach their own local resistance line and with the big falls in the correlated German DAX overnight, this is likely to push the market down further today. SPI futures are pointing to a sizeable gap down this morning to about 5460 or so, so watch out!
On to Europe, where the German DAX lead the risk off mood, falling nearly 2% to nearly breach 10,000 points.The four hourly chart has rolled over with the weekly downtrend back in play again, so further falls and correction is to be expected here:
US stocks followed and the S&P500 fell 0.6% and through significant support at 2150 points. The next level of support is 2120 points and oil will probably lead the way here:
On to currencies, where the Pound Sterling had a proper breakout yesterday, breaching the 1.33 handle and hopefully this one will stick! The USD is buckling across all the majors and Sterling is part and parcel of that move, and needs to hold above 1.3450 to turn this into a new trend:
Euro broke out above the 1.12 handle confirming yesterdays bullish pennant pattern forming on the four hourlies here, with another pause before a possible second breakout tonight. This is classical charting and working well – until it doesn’t!
Yen strengthened overnight on the safe haven bid, with the USDJPY falling below the tight support at the 102 handle, getting to just above 101. A weak NFP could see the 100 level breached on Friday:
The Australian dollar snapped on the RBA rate cut yesterday for about 15 minutes and then rallies over a cent against the USD in what looks like an epic short cover trade! It is maintaining support on the lower timeframes just above the 76 handle and caught in a tight band here. Where too from here? The next level to beat is daily resistance at the 76.50 level:
No surprises with oil as WTI stays below the $40USD per barrel level overnight, with my original target of $38 still the level to reach, and probably soon. As always with oil, expect the unexpected as this could accelerate down to$30:
Gold moved higher again, rising to $1362USD per ounce overnight and improving on its upswing, heading up to the July highs at $1379 or so. This is still overbought, with a mean reversion to the trendline to be expected:
The data calendar moves on today with local retail sales data for July, followed by the Caixin services PMI measures for China and then the Japanese version thereafter.
It heats up again tonight, so I’ll preview the European and US economic releases in my Macro Afternoon post – see you then!