By Chris Becker
Risk swung back to confidence overnight as the Federal Reserve turned Japanese in its rhetoric, while US initial and continuing jobless claims hit new record highs and well above expectations. Result = rally on Wall Street! The BOE kept their own asset program unchanged, and combined with the jobs print this saw USD reverse course as Euro and Sterling swung violently higher, taking gold with them.
Looking at Asian share markets from yesterday where In mainland China, the Shanghai Composite took back its previous gains to finish 0.3% lower at 2871 points, while the Hang Seng Index was unable to make any headway, slipping 0.5% to 24025 points, but still keeping off the recent daily lows at 23400 points. While this keeps the bears away at least with firm support at the 23400 point level firming, its not yet setting up for a breakout:
Japanese share markets reopened and were the only positive note in the region with the Nikkei 225 closing 0.3% higher at 19674 points, while the return of currency traders saw a mild selloff in Yen helping buoy buying spirits. Futures are looking brighter too with a further bounce of the recent daily lows, but unlikely to see a surge above 20,000 or very solid resistance thereabouts to finish the truncated week much higher:
The ASX200 continued its own pullback, closing 0.4% lower at 5364 points, not helped by a slightly higher Aussie dollar. SPI futures are up only a handful of points despite an upbeat Wall Street session with yet another sideways at best daily result expected. I still contend overhead resistance at the 5550 level remains too strong to beat without a major catalyst:
European markets were able to absorb the swing higher in Euro and rallied across the continent with the German DAX closing 1.4% higher at 10759 points. The daily chart looks like all the other equity markets currently in a stall phase below key resistance levels, and requires a big jolt to get back above:
Wall Street was this time strong across the board with the NASDAQ and broader S&P500 both up more than 1%, the latter closing at 2881 points. The daily chart shows price trying to get back above the lower trendline but trailing ATR resistance at the 3000 point level is still looming here, so I’m watching for a potential break below the recent daily lows:
Onto currency markets where USD volatility saw the continental and commodity currencies bounceback solidly with the Euro in a big trading range overnight, bursting through the 1.08 handle finally after recently making a two week low. This has potential but only up to trailing ATR resistance as the medium term downtrend remains intact:
The USDJPY pair recently fell sharply on the safe haven bid but with the return of Japanese traders who sold off Yen, the pair was looking a lot better before the US initial jobs claims report overnight, but then snapped back near its recent lows. Momentum readings continue to point to more USD weakness here where I’m looking for a rollover below the 106 handle:
The Australian dollar was the standout overnight, having lost some momentum after its Monday morning gap snapback, its flexed its scrawny muscles and pushed up towards but not through the 65 handle in a strong move. This abrogates my idea of a retest of the weekly low at 63.70 and puts in train a potential rally back up to the April highs nearer the 66 handle:
Oil prices swung back the other way overnight although volatility is slowly abating, with both WTI and Brent crude slipping around 2%, the latter remaining below the $30USD per barrel level after its recent swing higher. I still contend that former trailing ATR resistance area at around $30 is the key point to watch here as the downtrend remains intact:
Finally to gold, where after a sideways week has finally found some life overnight in response to comments from Fed officials, lifting straight above the $1700USD per ounce level to a new weekly high at $1714USD per ounce. The daily chart is now looking more promising but we need a breakout above the high moving average and more likely, resistance near $1730 before re-engaging:
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!