It was a night of the hawks with the BOE and ECB signalling their intentions to tighten policies, with the former actually raising rates (alongside the Norwegians too) which saw the USD weaken immediately against the major currency pairs, but also spooked equities with Wall Street taking back all its post-FOMC gains. The bond market saw a bifurcation with European yields lifting while the 10 year Treasury yield fell back towards the 1.4% level. Commodity markets however loved the relief with oil prices gaining more than 2%, gold shot straight up to the $1800USD per ounce level 1% while copper was up nearly 3%.
Bitcoin is still unable to gain traction, and while it found a little life post the Fed meeting it has deflated again overnight, retracing back down to the $48K level and almost making a new daily low this morning. The technical picture still remains grim for crypto with the next support levels are quite far away at the September lows around $43K, with daylight below to $30K next:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were putting in mixed sessions before gaining strength at the close, with the Shanghai Composite finishing nearly 0.8% higher at 3675 points while the Hang Seng Index was down 0.5% before climbing some 0.2% to finish at 23475 points. While this dead cat bounce is more than likely turning into a full on correction, a fightback maybe on the cards if USD can weaken appreciably from here. But I’m still watching for further price moves below the 23000 point level:
Japanese markets were the most bullish with the Nikkei 225 zooming 2.1% higher to 29066 points. Futures are indicating a pullback on this result given the upside volatility overnight, and the inversion of the USDJPY pair that acts as a risk proxy, and still note that daily momentum remains negative and there’s a lot of resistance to clear overhead here:
Australian stocks couldn’t catch a bid despite the great unemployment print and the positive overnight sentiment, with the ASX200 losing 0.4% to close at 7295 points as the 7400 point level becomes a distant memory. SPI futures are not looking pretty here with the 7200 point level possibly coming under threat as the market returns to the November lows. As I said previously, this may require a bigger catalyst than just the Fed meeting overnight to get things moving as the daily chart does not look pretty:
European markets all had nominally higher finishes with the FTSE the best up 1.2% while the German DAX managed a neat 1% finish higher at 15636 points. This was before Wall Street fell later in the session with futures indicating a pullback of at least half of those returns when markets re-open for the final session of the week tonight. Price is still unable to get clear of the former trailing ATR resistance level at around 15800 points so I’ll continue to watch the low moving average here which must firm as short term support, but notably daily momentum remains negative:
Wall Street loved the Fed, but hates the Europeans with the punchbowl taken away as the USD flopped and inflation expectations re-doubled. The NASDAQ took back its more than 2% gains while the S&P500 lost nearly 1%, taking it well below the 4700 point level and almost back to where it started pre-FOMC. The four hourly chart is a jumble and awash with volatility and as I mentioned previously, caution still requires watching for a clearance of the former highs instead of relying on a one session – or subsequent overreaction:
Currency market volatility remains extremely high with more wide ranging sessions with the ECB meeting seeing Euro rocketing higher out of its downtrend with a surge up towards the 1.14 level that calmed down later in the session. This is the price action to get excited about with a probable follow through and back to the recent weekly highs tonight to confirm the new direction against USD:
The USDJPY pair however went in one direction and that is straight down, pushing straight through the 114 level to settle right on short term support at the mid 113 level this morning. Momentum readings were extremely high and I suggested a pullback was likely but the combined tightening by European central banks is assaulting USD here, and with resistance thwarted yet again, direction will be hard to find – unless support breaks here tonight:
The Australian dollar had a similar ride to Euro although at the end if was pushed lower despite some really good results on commodity markets, making for a very interesting short term picture. The fact that price was pushed back towards weekly highs at the 71.80 area means its firmed as a proper anchor point going forward – so watch for any breach there to get things going again alongside an equity market Santa Rally:
Oil prices are still struggling to bounce back properly although Brent crude managed to lift back above above the $74USD level later in the session. The former monthly resistance level at $77 and then former support at the $80 level remain the targets to get back to in any bounceback, but so far this has turned into a dead cat bounce as daily momentum inverts and price moves down towards the psychologically important $70 level:
Gold has had a volatile week to say the least but last night was the best with a rocket under its kilt to get up to but not through the $1800USD per ounce level due to the USD reversal. This changes the picture entirely with short term momentum now overbought and the overhead resistance taken out with a new significant daily high obviously helping with sentiment. The question is will only one session be enough to reverse course for the shiny metal? A close above the $1800 level would solidify it:
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!