See the latest Australian dollar analysis here:
Another shaky night on equity markets as traders position themselves for tonight’s Federal Reserve meeting which could prove crucial to the future of the correlated post-COVID bubble. Wall Street was largely unchanged although tech stocks pulled back in line with European bourses with Treasury yields lifting off the deck. The USD was up ever so slightly but Yen finally saw some sellers that should provide Japanese stocks a tailwind in today’s session. Commodity markets continue to overshoot with copper putting in another high alongside iron ore as oil prices came back firmer although gold remains unable to break through the $1800USD per ounce barrier.
Bitcoin put in a recovery rally in the last 24 hours with a surge back through the $55K level last night, taking it back to last week’s average price. Not yet out of the woods but definitely looking better following the Tesla relevations:
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Looking at share markets in Asia from yesterday’s session where Chinese markets remaiedn in a funk with the Shanghai Composite falling sharply before recovering after the lunch break to close with a scratch session at 3442 points while the Hang Seng Index did the same, barely lifting a few points higher to almost get back above 29000 points. Futures are suggesting another staid open this morning with this market struggling to make any big move above 29000 points to at least return to the March highs. The technical pattern and positive daily momentum do point to a possible bottom here – the key neckline being the 29500 point ATR daily resistance level:
Japanese markets pulled back even sharper however on the BOJ non-decision meeting yesterday with the Nikkei 225 closing 0.4% lower at 28991 points. The daily chart shows futures suggesting another flat open despite the big pullback in Yen overnight that should act as a nice tailwind but sentiment is overruling here for the moment. The next technical level below at the 28200 point level is not that far away, so I’m positioning for a proper break above the high moving average before getting excited:
The ASX200 again sold off mildly, losing only 0.2% but still finished above the 7000 point barrier at 7033 points. SPI futures are up nearly 20 points despite the mixed lead on Wall Street with all eyes on the CPI print today to indicate future valuations as the RBA will have to play catchup with staid inflation data yet again:
European markets continued their tepid start to the trading week by taking back the very meagre Monday night gains to finish slightly in the red across the continent with the German DAX losing 0.3% to finish at 15249 points. Sentiment remains neutral so far with daily ATR support still firm at the 15000 point level as I remain cautious as momentum readings subside and do not yet indicate a re-entry position, indeed some froth should be taken off the table here:
Wall Street had 2 scratches and a loss with the headline DOW and S&P500 going nowhere while the NASDAQ took back nearly half of its previous gains to finish about 0.4% lower. The broader S&P500 is seeing price back at the recent highs and wanting to surge even higher with momentum readings nicely overbought and ready for the next up-leg – but its all about the Fed:
Currency markets are somewhat mixed with USD flopping from weakness to strength against Yen and Aussie while Euro is still looking bullish here after recently hitting a new weekly high above the 1.21 handle on Friday night. While the union currency is in a much stronger position to keep accelerating against King Dollar, I’m watching for overbought momentum to remain at these levels and not flat line as it did last trading week, so watch for short term support at the 1.2060 level to remain solid here:
The little blip higher in the USDJPY pair to start the week has turned into an outright breakout with a move straight through the 108 handle following yesterday’s BOJ interest rate meeting. As I said yesterday there was a potential swing breakout brewing here as the technical setup was complete as it makes a two week high getting back to the pre-breakdown zone just below the 109 handle. This is slightly overdone so watch for a small pullback to the mid 108s to correct the overshoot:
The Australian dollar however sold off through most of the session overnight after failing to breakout through the 78 handle proper with its start of week surge. This is likely more positioning by traders going into todays inflation report, so I continue to watch for this pullback to extend below the low moving average:
Oil remains relatively calm amid the buying frenzy on other commodity markets with a solid session seeing Brent crude almost lifting through the $66USD per barrel level. This market remains poised as daily momentum is nominally positive but not yet excited with a wait and see mode here above the $60-61 zone:
Gold is still trying to gain upside traction in the wake of a weaker USD with yet another tepid session that failed to finish above the $1800USD per ounce level. Daily price is still above the February lows (solid horizontal black line) so while this completes the short term bullish bottom pattern, longer term charts continue to signal a 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!