By Chris Becker
Risk markets shot out the gate to start the week with fresh vigor, with more economic upside expectations overshadowing rising pandemic concerns across the US and other emerging countries. The US services ISM survey showed a substantial increase although employment continued to lag, but this didn’t stop Wall Street bidding up everything in sight, which will translate into more gains here in Asia this morning. We also have the latest RBA meeting which might knock around the Aussie dollar which stalled out last night in anticipation.
Looking at share markets in Asia from yesterday where the Shanghai Composite closed over 5% higher to 3332 points while in occupied Hong Kong the Hang Seng Index was dragged only to finish nearly 4% higher to 26339 points, with the full session clear off the uptrend of the former weekly highs throughout June and May. The daily chart told the picture beforehand with a lovely pre-breakout but this move seems unsustainable from the get-go, which in this environment probably means it has more to run with the pre-pandemic highs at nearly 30000 points the target:
Japanese stocks put in good sessions too, with the Nikkei 225 lifting 1.8% to 22714 points. Futures are indicating a solid start today despite a much higher Yen overnight, following the Wall Street lead with the daily chart showing a nice breakout and the usual momentum trading that should follow from this move:
The ASX200 was the odd one out, opening down in line with SPI futures, then peeping above the scratch level at lunchtime before selling off in the close as the Victorian border closure dampened risk appetite, closing 0.7% lower at 6014 points. SPI futures are up more than 30 points however, so we should see a fill of some of yesterday’s losses but it could stumble at the RBA meeting later in the afternoon – watch for a new daily high that could clear the sinuses:
European markets started the week on a very solid footing, chasing Wall Street with the German DAX closing 1.6% higher to 12733 points. Momentum has finally picked up here previously with a clear breakout above the recent session highs and this should lead to a retest of the May highs at just below the 13000 point level:
Wall Street reopened with a flourish with the S&P500 lifting over 1.5% to finish at 3159 points, clearing strong resistance at the 3130 point level. The four hourly chart shows a solid trend since the late June lows and is on target to return to the early June highs closer to 3300 points:
Onto currency markets where volatility came back alongside US forex traders with the ISM print helping send the USD down to new lows, pushing Euro up to match its two week high just above the 1.13 handle. This move and much higher momentum readings than expected negates my idea of a return to the previous weekly lows, although given the overbought nature, could see a small inversion in the short term:
The USDJPY pair had a fake breakout to start the week, then declined on every session as USD weakness was baked in overnight, finishing at a marginal new weekly low just above the 107 handle. This takes it below the low moving average on the four hourly chart and puts it close to trailing ATR support as momentum inverts and Yen buyers step in reluctantly:
The Australian dollar tried to keep on climbing with its solid start to the week but stalled out again at just below the 70 handle after getting a little overbought. Traders are positioned for today’s RBA meeting, so watch the low moving average and trendline from the end June lows to come under threat:
Oil prices moved around 0.7% higher in a relatively lacklustre session with Brent futures starting the week just above the $43USD per barrel level, almost matching the previous price highs from this rebound rally. Daily momentum remains positive for now, with a breakout above the high moving average at $43 or so required before another legup in yet another central bank supported ridiculous rally:
Gold was finally able to to put on a new daily high, having a very solid session to start the week and re-engage this rally to finish at the $1785USD per ounce level. Momentum remains in a solid overbought mood here, although watch for an inversion below the 100 level which is the usual sign for a swing short position, with a view to keeping the low moving average as a good uncle point or place to add to longs:
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!