By Chris Becker
Another shift in sentiment overnight as the risk complex hinges on good economic news and possible coronavirus vaccine developments. Wall Street swung back in favour as the latest durable goods order surprised slightly on the upside, while in Europe the closely watched IFO survey gave some hope yet stock markets were lacklustre. The big news is the new yearly lows in the USD with record highs in gold, silver and almost Bitcoin, while the majors like Euro and Pound Sterling advanced to monthly highs.
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed up a handful of points to 3205, trying to recover from near 4% falls on Friday. Meanwhile in Hong Kong, further worries about the spread of coronavirus has seen the Hang Seng Index off by nearly 0.5% to 24603 points. The daily chart shows key daily ATR support ready to fold and possible turn this small dip into a wider correction:
Japanese stocks finally reopened after a very long weekend, but did not fall as expected with the Nikkei 225 closing only 0.2% lower to 22715 points. Futures however are indicating a possible rebound on the open this morning in line with other risk assets, with mild support at the 22300 point level looking to hold in the short term, but it’s nothing to get real excited about:
The ASX200 was looking to break below the 6000 point psychological level but instead was buoyed by commodity stocks and gold miners to finish 0.3% higher to 6044 points. SPI futures are up nearly 30 points or 0.5% so at worst we get a bullish sideways trend here, although that could again hinge on the Victorian breakout. I’m still watching support closely at both the 6000 point and 5800 point ATR level:
European markets had some good economic reports to cling onto but the much higher Euro and Pound Sterling continue to weigh down with scratch or minor falls across the continent. The German DAX literally closed with a scratch result, moving nowhere to finish at 12838 points. Momentum has rolled over from its overbought status but price remains firm above the low moving average – only just:
Wall Street found a little traction on the durable goods order print with the NASDAQ bursting up nearly 1.7% while the S&P500 finished 0.7% higher to 3239 points. The four hourly chart shows how price has bounced off the 3200 point support level where it found some firmness on Friday night. Tonight’s session is key to try to get it back on trend and/or up to the former highs at 3260 or so, but watch that zone for any signs of a swing back down:
Currency markets remain heavily concentrated as USD sellers with all the majors again advancing to monthly or even record highs as King Dollar takes a near two year nosedive. The Euro pushed straight up through the 1.17 handle on the City open after gapping higher yesterday morning. As I said yesterday, “overbought” or “oversold” sometimes doesn’t matter for currencies as they can continue upwards as necessary. The four hourly price pattern shows a small amount of exhaustion with deceleration in the last two sessions, but only just:
The USDJPY pair was pushed lower as expected with a determined push below the 106 level on the Monday morning gap open down into the low 105’s with also some minor signs of deceleration. Note how four hourly momentum is reverting a small way, but nothing to get excited about just yet:
The Australian dollar came back after its relatively quiet Friday night as it continued to follow the stocks and risk assets, pushing back up through the 71 handle and almost matching its previous weekly high. The bounce off of four hourly ATR support at the 70.60 level should continue today as commodities move higher:
Oil futures were relatively stable given the lower USD with the Brent marker almost able to get back near the $44USD per barrel level, starting the week out just below as price remains listless. Daily momentum had been pushed into the overbought mode and support has been very firm, but this is looking tiresome, so be prepared for a violent breakout either way soon:
Gold finally beats its record high with a stonking single session to close at the $1942USD per ounce level. This has been a textbook blowout FOMO trend with momentum now twice off the charts – this can only resolve in a snapback, but with everyone piling into anything not USD going into the US presidential “election”, anything can happen:
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!