By Chris Becker
Traders hitched the ride on safe haven assets overnight as caution reigned across risk markets following a mixed session in Asia and another weekend of Trumpisms to absorb. Gold soared higher alongside Yen, while Euro was hit due to machinations in France – a possible Frexit – while oil prices retreated with Treasury yields.
First to Asia’s session yesterday, where the Shanghai Composite lifted half a percent to 3157 points, still looking shaky on the daily chart but momentum is now positive so another attempt at the first New Year high is on the cards here:
The Nikkei closed up 0.3% to just below 19000 points even as the Yen moved higher against USD, which continued this strengthening trend overnight. Futures are indicating a reversal of the cash result this morning, so again watch ATR support here at 18500 points to possibly breakdown:
The ASX200 closed down 0.11% to 5615 points as banks and financials were bid on the US lead due to the probable recall of the Dodd/Frank legislation, commodity and other AUD exposed stocks dragged the bourse down. The daily chart shows that support at 5600 points is being respected but SPI futures are indicating a fall to that level, as momentum crosses over to negative. Unless the US rallies soon, we could see a wider correction here to 5400 points:
On to Europe, where sellers were out in front across the continent as French ructions ruled. The German DAX fell over 1% to 11500 points, threatening key ATR support at 11500. Yet another market poised to breakdown if confidence is not restored soon:
US stocks all finished in the red, but only slightly so with S&P500 closing down 5points or 0.2%, unable to matach the previous weekly high that is setting up as key resistance here. The follow through from the solid NFP is just not here – not even Trump goosing the financial sector to literally go nuts is helping:
On to currencies, where Pound Sterling continues to melt down slowly against USD finding support just below the 1.25 handle here. This takes it back to last week’s low but not below so there is a chance of a rebound here, but slim, so I’m watching the low proper for a shorting opportunity:
The Euro fell to its daily trendline before rebounding a little late in the session to finish at 1.0750 against USD. Looking further back, the daily/four hourly chart is setting up a bearish head and shoulders pattern here with the neckline at the 1.07 handle proper, so watch that trendline:
Yen sellers capitulated overnight with the USDJPY pair crashing through long held support at the 112 handle. As I’ve been saying, a fall below could see a wilder selloff in the pair as it creates the right shoulder in a big head and shoulder pattern on the daily chart, with my target at 104 or lower:
The Aussie dollar remains firm against USD as traders stay calm before todays RBA meeting, with a hold the most likely outcome. The moving average band is tightening with a mid point of control at the 76.50 level, and I’m watching last week’s high to come under pressure if the RBA language remains sanguine:
Oil was slowly getting interesting but traders are getting bored here with no new catalysts. The WTI contract overnight moved lower to the $53USD per barrel level as resistance at $54.50 continues to be rejected. I still contend this could explode upwards quiet violently so watch out!
And to gold, which shot higher overnight to a near three month high to $1234USD per ounce level on safe haven buyer. This means we’re off to at least $1300 for mind:
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!