Last night saw the Federal Reserve FOMC meeting leaving policy settings unchanged and very accomodative with the USD selling off sharply against the major currency pairs as a result while Wall Street found some lost confidence later in the session. The bond market saw 10 year Treasury yields trading to the 1.69% level before falling back to 1.6% flat, while commodities were mixed with oil pulling back slightly, copper lifting more than 1% as gold found some life due to the weaker USD.
Bitcoin acted like a true undollar asset overnight by breaking out alongside other major currencies against USD, shooting back up to the $57K level after range trading in the previous session. This should be setting up for a possible return to the previous gap high above the $60K level:
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite was dead flat, closing at 3445 points while the Hang Seng Index did the same, up a handful of points to 29034. The daily chart previously showed a bearish engulfing candle pattern from Friday’s session which is still dominating the short term price pattern, where price must push significantly higher in the next few sessions or we could see a possible breach of support at the previous daily lows at the 28300 point level:
Japanese markets also put in scratch sessions, with the Nikkei 225 closing 0.1% lower at 29914 points. Futures look good with the daily chart still showing price building back above the trendline from the December lows with a continued advance over the previous ATR trailing support level at 29000 as momentum readings slowly move higher. A slump in the USDJPY may provide a headwind in getting back to 30000 points however:
The ASX200 was the worst in the region, falling nearly 0.5% to 6794 points. SPI futures however are indicating another poor start this morning, down over 10 points so we’re likely to see price remain below the 6800 point level, unless the unemployment print surprises this morning:
European markets were mixed leading up to the FOMC meeting with minor pullbacks the order of the session as only the German DAX advanced, lifting 0.3% to 14596 points, extending gains well above previous resistance at the 14000 point level. Momentum readings remain overbought with price pushing aside local resistance at the 14500 point level, setting up for more price gains although the higher Euro could prove a headwind:
Wall Street was listless until the PunchBowl meeting was over with the final few hours providing all the gains with green across the three major bourses, with the NASDAQ up 0.4% and the S&P500 finishing 0.3% higher, back to its record highs to close at 3974 points. The four hourly chart shows price wanting to push through the previous February high, filling this reflation rally to completion and get going to the 4000 point level, but I still contend that resistance is slowly building here:
Currency markets moved swiftly out of oscillation mode with low volatility into a very high volatility breakout mode as the reaction to the FOMC meeting saw a co-ordinated selloff against USD. Euro swept aside its retracement, bouncing off the 1.19 handle to get straight back to last week’s high at the 1.1980 level as four hourly momentum flopped back to the upside. I’m waiting for a follow through above the 1.20 handle as signs of a new trend in place:
The USDJPY pair went downwards instead as price rebuffed overhead resistance after briefly beating last week’s high at the 109.20 level and was pushed below the 109 handle proper. This could well the catalayst for a double top pattern presaging falls below the 108.30 level, so watch for any further downside below the 108.70 ATR support level for signs of the latter:
The Australian dollar was the biggest mover against the Fed, putting on a near 100 pip move zoom higher to just on the 78 handle this morning. This wipes out all of this week’s lacklustre performance to the downside and to a near two week high:
Oil prices pulled back again last night, with Brent crude slipping below the $68USD per barrel level in the wake of the Fed meeting. The 2019 highs at the $74 level still look good as the next upside target with momentum nicely overbought, but watch the low moving average on the daily chart for signs of lack of buying support for this next move:
Gold is doing better in its bounceback and managed to put on meaningful gains to close at the $1745USD per ounce level overnight. While this short term bounce is likely just a short covering move up it could take the shiny metal back up to former support, but very strong resistance at the $1770 level, with the longer term chart signalling the next downside target at the 2019 pre-breakout highs around $1500:
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)
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!