The fallout from the US inflation print continued overnight although the closed US bond market reduced volatility in that most important market, leaving shares to lift ever so slightly. The USD continued to advance against all the majors save gold, which is moving higher above the $1850USD per ounce level. Euro again fell back sharply while the Australian dollar fell below the 73 cent level. Commodity markets were very mixed with oil down around 0.3% on both markets, copper bouncing sharply to be up nearly 4% while iron ore prices also saw a big comeback after falling most of the week and recently making an 18-month low.
Bitcoin is continuing its consolidation below the $65K level, thereby taking more heat out of the recent breakout that saw it make a new historic nominal high. This breakout maybe a stretch too far with momentum readings reverting but watch that low moving average on the daily chart as short term support:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares surged despite the Evergrande crisis, building on the previous sessions late bounceback with the Shanghai Composite up more than 1%, closing at 3532 points while the Hang Seng Index did the same with a 1% rise as it climbs back above the 25000 point level, finishing at 25247 points. Price action was showing a return to the dominant downtrend, but as I noted yesterday, deceleration and a failure to close below nominal ATR support at the 24500 point zone pointed to a possible reversal. And while a one day action does not define a new trend, the daily chart does look like supporting another upside session here, but be cautious of support at the 25000 point level:
Japanese markets also lifted higher, all due to a lower Yen, with the Nikkei 225 closing 0.5% higher at 29277 points. Futures are indicating potentially more upside here as daily momentum remains positive after its overbought retracement but resistance overhead at 30000 points is still proving too hard a target to breach:
Australian stocks were the worst in the region, not helped by a diving AUD with the ASX200 closing more than 0.5% lower at 7381 points. SPI futures however are up by at least 30 points or 0.4% so we could see a brighter finish to the trading week. As I said previously, a return to the former August highs is still on the cards in the medium term, with long tails of buying support evident on the daily charts, but short term momentum indicates another pause here at the 7400 point level:
European markets were nominlaly bullish but it was focused more on the FTSE which put on another 0.6% despite a disappointing GDP print, while the German DAX put on 0.1% to finish at 16083 points, again only barely building above the 16000 point level. The daily chart looks nominally bullish but caution must reign here as the level of progress is dwindling and even a sharply lower Euro is not providing any upside catalyst:
Wall Street didn’t falter as expected overnight, although the headline Dow did put in a new low and the S&P500 barely made headway, with all the action on the NASDAQ which finished 0.5% higher. The S&P500 gained only a handful of points to close at 4649 points with the four hourly chart looking weak indeed as momentum remains negative and the high moving average definitely not under any threat. A violent retracement below trailing ATR support the 4650 point level is required before calling this rally over, and this not yet enough to get things moving lower:
Currency market volatility eased off only slightly with the fallout from the US inflation print continuing as USD makes new highs. The US Dollar Index finished 0.3% higher with Euro again pushed significantly lower for yet another monthly low, hitting the mid 1.14 level. Momentum was extremely oversold but we could see more downside in the sessions ahead:
The USDJPY pair has consolidated its breakout and steadied around the 114 handle overnight, still below the previous weekly intrasession highs but looking solid nonetheless. Short term momentum remains slightly overbought and price is supported at the 113.70 level so watch for another attempt to breakout and push up against medium term resistance at the 114.30 level:
The Australian dollar is under enormous pressure against USD with the double whammy of iron ore and US inflation sending it to the cleaners overnight, falling through the 73 handle for a new monthly low. There is an element of price deceleration however so we could see some consolidation around or slightly under that level today, but the writing is on the wall here:
WTI and Brent crude futures were unable to gain traction overnight following a false breakout mid week with Brent retracing back below the $83USD per barrel level. The previous move off daily ATR support had crossed above the high moving average on the daily chart but momentum was not behind it with a series of lower highs not yet broken, with price action suggesting more sideways before upwards:
Gold continues its zoom higher following the US inflation print, pushing right through the $1850USD per ounce level after easily exceeding the previous highs from late August. Price action is obviously well overdone, with momentum readings nearly off the chart, but it confirms the new uptrend and sparks the potential to return to the May highs at $1900USD per ounce, but watch for a short term reversion going into the end of the trading week:
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!