By Chris Becker
It was the return of King Dollar overnight as the USD strengthened against all, smacking gold down nearly $80USD per ounce in the process, pulling the Australian dollar and others in the process as Wall Street stumbled. This was mainly due to the release of the latest FOMC minutes that while still very accomodative and certain of continued easing, maybe pointing to an easing of the easing, although notably bond yields didn’t move that much post-release, so this could all be just noise.
Looking at share markets in Asia from yesterday where in mainland China, the Shanghai Composite was down all day and then accelerated into the danger zone near the close, falling over 1% to finish at 3408 points while in Hong Kong the Hang Seng Index trailed slightly less with another dour session to finish down 0.7% at 25178 points. This puts price back below the high moving average, with resistance definitely firming on the daily chart at the 25400 point level. Although momentum has been ticking along, the lack of a stronger trend is worrying and we could see a more substantial rollover soon:
Japanese stock markets came back however after a poor start to the week and a slightly lower Yen, with the Nikkei 225 closing 0.3% higher at 23110 points. Futures however are indicating another slow start this morning so this could be a stallout once again with price unable to make any advance above the high moving average in an attempt to beat the late May highs:
The ASX200 was the standout, again putting on nearly 0.8% to 6167 points while the Australian dollar continued to hesitate. SPI futures are down several points on the Wall Street stumble, as resistance at the May highs remains the level to beat (upper black horizontal line). Watch for ASX, Coca-Cola Amatil (CCL), Origin (ORG), Qantas (QAN) and Webjet (WEB) plus Wesfarmers (WES) in today’s earnings:
European markets lifted strongly across the continent on the much lower Euro with the German DAX finishing 0.7% higher to close at 12977 points, although it gave up most of this advance in futures.The daily chart continues to paint a troubling picture here, albeit with solid momentum and no new session lows but the rounding or triple top bearish pattern continues to form and still requires a full clearance of the 13000 point level pretty soon to get out of trouble:
Wall Street had a little stumble and paused in its successive run up of record highs (that are being propelled by just five companies, it must be repeated), with the S&P500 falling 0.4% to 3374 points, retracing below the pre-pandemic highs (solid black horizontal line). The four hourly chart looks a little dramatic and may be a harbinger of further falls, but watch for trailing ATR support below to be filled in by the BTFD crowd:
Currency markets had all the action with the firming of the USD turning into a full reversal against the major currencies and gold. Euro fell abruptly after stalling out at the mid 1.19s as the EZ core inflation print had no surprises, this was all about USD strength, taking out all of the gains since the start of the trading week. Momentum is not yet negative but could overshoot here down back towards the previous weekly lows so watch out:
The USDJPY pair had a very strong reversal that had its start yesterday in finding support at the last week lows near the 105.50 level in a deceleration pattern. The FOMC response took the pair back above trailing resistance at the 106 handle in a lovely swing move that could find more ground today as Japanese traders return to their desks:
The Australian dollar was hit hard overnight, retracing from the 72.70 level to just below 71.90, wiping out all of the nascent gains so far this trading week. Yesterday I mentioned about watching for the tell tale signs of a swing move back below the high moving average as four hourly momentum went extremely overbought and here we are:
Oil futures still can’t gain traction with the Brent once more oscillating around the $45USD per barrel level, with WTI futures pushing up toward the $43 level last night. The four hourly chart of Brent still shows a market unable to capitalise on its previous weekly breakout above the $44.30 level with considerable resistance overhead, but support remains nice and tight at the $44.30 level:
Gold was flummoxed again, this time on the FOMC minutes which is unsettling given the language was definitely accommodating. Nevertheless the shiny metal lost over $60 in quick form, settling at the $1935USD per ounce level this morning. Watch key support at the $1930 level to hold and if it doesn’t, the next level is below $1900 at the recent correction lows:
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!