By Chris Becker
Risk sentiment is fading slightly as geopolitical concerns across the Koreas and India/China border clash with the growing coronavirus outbreaks in China and the Southern/western US states. Wall Street sold off going into the close, which should translate into mild losses on the open here in Asia, while currency markets were relatively quiet although Yen buying is accelerating.
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed modestly higher at 2935 points after being down earlier in the session, while the Hang Seng Index finished 0.5% higher to 24481 points. Price remains poised within the mid range of the previous wide channel from May as daily momentum moderates slightly with the balance of control in the hands of the bulls here but this may require a weekly timeline to make decisions on as daily charts are looking messy:
Japanese share markets were the only losers in the region with the Nikkei 225 off by 0.6% to 22455 points. Daily ATR support at the 21500 point level remains firm and longs need to watch the high moving average for signs of a breakout and return to the previous highs as momentum also remains highly positive:
The ASX200 had another solid day, closing 0.8% higher at 5991 points, just shy of the 6000 point barrier as sectors traded profit for losses in some rebalancing after a volatile week. SPI futures are down at least 30 points, with the waited breakout above 6000 points still not ready as risk takes a breather:
European markets had modest success overnight with the German DAX closing 0.5% higher to 12382 points, holding on to its start of week gains. Solid support at the 12000 point level should continue to provide a good uncle point to get back on this relief rally, but again there is resistance above at the recent daily highs:
Wall Street had another interesting session, as the NASDAQ was the only one to advance, while the S&P500 closed 0.3% lower to 3113 points as it sold off again going into the close. This still keeps it just below short term ATR resistance and notably, does not translate into any positive momentum. Are we looking at a rollover already? Watch that low moving average for signs of an inversion:
Onto currency markets which had another mixed result overnight with USD weakness and strength reflected across the majors. Notably, Euro made a new daily low almost below the 1.12 handle proper before a late bounceback taking it to the Monday morning opening price at the 1.1240 level. Four hourly momentum remains negative, but not quite oversold with tentative support here at the weekly lows just holding on:
The USDJPY pair however remained depressed below short term resistance at the 107.60 level, this time selling off to head back to the 107 level and below its Monday morning starting price. The inversion trade may start again soon if no new session highs are made shortly, as the anticipated rollover of momentum builds up steam, with the 106.50 former lows the target here:
The Australian dollar had a similar session to the Euro again, unable to break through short term support or resistance with a staid finish to the last 24 hours within its moving average band. In the short term, the bears have the Pacific Peso in their sites so watch for weakness around the low moving average at the 68.60 level with a possible return to last week’s lows at 68 cents:
Oil prices paused overnight with Brent futures remaining above the $40USD per barrel level, with previous resistance at $35 now providing very solid support. Price is ready to go back to overbought readings on the daily momentum chart so we could see a retest of the previous breakout highs above $42 shortly:
And, finally to gold which finished the night just below the $1730USD per ounce level once gain in yet another staid, boring session. The bounce off daily ATR support has stalled here with the series of lower daily highs weighing on the market. Any medium term long position requires a confirmation of a push through the $1750 level for a proper breakout to a new monthly/yearly high, so watch momentum readings here – low volatility always begets high 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)
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!