The bounce in risk markets continued overnight with broad gains across Wall Street and European bourses, helped by a lower USD and a relatively calm bond market. Eurozone unemployment fell to a new low while the latest US ISM manufacturing survey pulled back slightly with expectations over the January period. Currency markets continued their reversal in USD strength due to the change in risk sentiment, with Aussie and Kiwi especially gaining, while Yen remained somewhat firm which could prove a headwind for Japanese stocks again. Gold is hovering at the key $1800USD per ounce former support level as other commodity markets remain robust with Brent and WTI crude pulling back slightly but still holding on to their near decade highs.
Bitcoin is still moving into recovery mode following its previous big selloff, pushing up above the $38K level to almost make a new weekly high. The four hourly chart shows a potential bottom at the $32K level but this is very early days yet and could be swept aside very quickly:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares remain closed for Chinese New Year.
The Nikkei 225 closed 0.3% higher at 27089 points in a mild session despite the stronger Yen. Futures are suggesting an uneasy open with a lower Yen overnight, with the downtrend from the 29000 point high now under threat as a swing play gathers momentum. As I said yesterday, volatility is not yet over but short positions may begin to unwind here quickly so watch for a breakthough above the high moving average on the daily chart:
Australian stocks were able to absorb the RBA non-decision decision making with the ASX200 closing 0.5% higher to just get back above the 7000 point level at 7006 points. SPI futures are up more than 0.8% so we should see a proper breakout above 7000 points but there’s a lot of room to recover here from the previous weekly/monthly support levels that are firming as resistance:
European shares pushed around 1% higher across the continent and even in Brexit-land, as the Eurostoxx 50 index finished 1.2% higher at 4224 points. Futures held on as Wall Street closed with similar gains, as confidence builds despite a higher Euro as the long tails of daily intrasession buying had painting a bottom picture. Momentum has inverted from its very oversold levels but is not yet positive yet, with price still just below the previous daily support levels:
Wall Street continued its push higher, but it was broad based with all three bourses putting in near identical gains, with the NASDAQ up 0.75% while the S&P500 finished 0.7% higher at 4546 points. The four hourly chart shows price extending its gains and breaking through the 4540 line to put in a new weekly high and put some meat behind this bounce to make it more sustainable, having cleared the tight rectangle of support and resistance. Momentum is nicely overbought and should support further gains from here:
Currency markets remain in USD reverse mode with a stronger than expected Eurozone and German unemployment print helping Euro almost push through the 1.13 handle overnight. This swing play is gaining more traction but four hourly momentum is not yet overbought and price is still below the previous weekly high:
The USDJPY pair remains depressed despite the risk on move after recently topping out at the mid 115 level following a clear bearish rising wedge pattern. This retracement has now taken it well below the 115 handle but the last few sessions have stabilised at trailing ATR support at the 114.70 level but that is still below last weeks former breakout level. Momentum is negative but not oversold so this makes for a hard analysis on where it will travel next. Watch for any new session lows from here as the first guide:
The Australian dollar is now up more than 100 pips from Friday night, having clearly bounced off the key 70 handle level that is probably on everyone’s charts with short term momentum now looking slightly overbought following the hiccough that was the RBA meeting yesterday. Traders are pricing in more rate rises, but price action on the longer term charts still are suggesting a lower trajectory for the Pacific Peso overall. In the short term, the next level to beat here is last week’s intrasession high at the 71.70 level:
Oil markets remain well support but still directionless with Brent again contained just below the $90USD per barrel level overnight. Daily price action via candle analysis is still suggesting a potential top as momentum readings pullback from what was overbought territory even as price remains supported above the previous highs at the highest horizontal black line. The next target at $100USD per barrel maybe a step to far, so watch for any profit taking below the $85 level:
Gold is trying valiantly to get back above the former $1800USD per ounce support level, hitching the ride with the other undollars but is failing to really punch through, finishing just $1 above last night. Price action remains contained below the daily trendline from the December lows where there still could be a full retracement down to $1760 or so after a small amount of consolidation here so watch for any rollover:
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!