Wall Street extended its gains overnight, leaving European equities to float along without direction as the latest Eurozone inflation print was higher than expected, dampening risk taking. Currency markets continued their reversal in USD strength due to the change in risk sentiment, but Aussie and Kiwi slowed down while Yen continued to appreciate against USD, which should prove a headwind for Japanese stocks again. Gold is hovering just above the key $1800USD per ounce former support level as it struggles to find more buying support while other commodity markets remain robust as Brent and WTI crude push up slightly as they hold on to their near decade highs.
Bitcoin was trying to move into recovery mode following its previous big selloff, but failed overnight as it tried to push through the $38K level. The four hourly chart shows a new intrasession weekly high, but only just as it rolls over and heads to ATR trailing support closer to $36K as momentum inverts:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares remain closed for Chinese New Year.
Japanese stocks markets saw more upside gain as Yen appreciation slowed down before the session, the Nikkei 225 closing 1.7% higher at 27553 points in a stonking session. Futures are suggesting an uneasy open with a much lower Yen overnight, despite this swing play now gathering momentum. Watch for another break and close above the high moving average on the daily chart:
Australian stocks continued to build post the RBA meeting and also the Governor’s “she’ll be right” attitude to inflation with the ASX200 putting on more than 1% to close at 7087 points. SPI futures are up only slightly so we should see this breakout above 7000 points hold but there’s a still lot of room to recover here from the previous weekly/monthly support levels which may prove too firm as resistance. Notably, daily momentum is nowhere near positive and price is not yet above the high moving average so caution must reign for now:
European shares floundered about with only Brexit-land really gaining as the FTSE put on 0.6% while the Eurostoxx 50 index lost a handful of points to finish 0.1% lower at 4222 points. Futures held on as Wall Street closed with much better gains, as the higher Euro is providing some resistance in the short term. Price action is obviously finding it hard to get past the former support, now resistance area at 4250 points, and while momentum has inverted from its very oversold levels but is not yet positive yet:
Wall Street continued its push higher, again broad based with all three bourses putting in near identical gains, with the NASDAQ up 0.6% while the S&P500 finished 0.8% higher at 4585 points. The four hourly chart shows price extending its gains after breaking through the 4540 line to put more momentum 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 inflation helping Euro almost push through the 1.13 handle overnight. This swing play is turning into a proper trend as four hourly momentum becomes overbought and price almost clears the previous weekly high, but there is a lot of resistance at the 1.14 handle to overcome next as we head into the next Fed meeting:
The USDJPY pair is selling off again despite the risk on move that should see it move higher in correlation. This retracement has followed through well below the 115 handle and trailing ATR support at the 114.70 level with the next target below being last week’s low at the 113.70 level. Momentum has moved to oversold levels so direction is definitely firming in the negative direction:
The Australian dollar is poised here just below the mid 71 level, taking a breather after a 100 pip plus move higher that has almost taken it past last week’s intrasession high at the 71.70 level. Short term momentum is still nicely overbought and price action is setting up here for a breakout, so watch for any move above 71.50:
Oil markets remain well supported but lacking direction 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 still trying to get back above and maintain a position above the former $1800USD per ounce support level, hitching the ride with the other undollars and last night saw momentum start to build behind this move but it maybe fleeting. 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 as price approaches trailing ATR resistance on the four hourly chart:
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!