Friday night saw risk sentiment again bifurcate as European stocks failed to engage while Wall Street lifted on upgraded forecasts from a more hawkish Federal Reserve. The USD was basically unchanged but remained strong against Yen while Euro retraced back below the 1.10 handle. The Australian dollar also remained strong, staying above the 75 handle without any further upside while bond markets range saw big upside moves in yields on the back of the Fed, with the 10 year Treasury pushing up to the 2.5% level. Commodities were somewhat mixed as oil prices lifted slightly, with Brent crude back above $120USD per barrel while gold and copper were basically unchanged.
Bitcoin had been building upside momentum during last week after being contained around the $41K level and finally pushed through for a new monthly high on Friday night, pushing through the $46K level. Daily momentum is considerably overbought having cleared resistance at the January and February highs so the $50K level will come under threat next:
Looking at share markets in Asia from Friday’s session, where mainland Chinese shares fell sharply mid session with the Shanghai Composite down more than 1% at 3212 points while the Hang Seng Index succumbed to another selloff, down 2.4% to close at 21404 points. I mentioned last week that the daily chart was showing price action poised but not ready to engage to the upside as momentum readings remain neutral, because the key issue is very strong resistance at the 22600 point level that needs to be clear. It appears we have a strong, but inevitable dead cat bounce to contend with here so watch the low moving average to come under threat next:
Japanese stock markets put in scratch sessions with the Nikkei 225 finishing up a handful of points to remain above the 28000 point level. Futures are indicating a flat start to the trading week even though Yen remains extremely weak, the messaging from overseas markets is not that clear. Price action however does indicate more upside potential given that weekly resistance at the 27500 point level has been cleared with the February highs taken out:
Australian stocks had the best session in the region with the ASX200 closing nearly 0.3% higher to finish the week just above the 7400 point level. SPI futures are up nearly 0.5% or so in line with Wall Street so we’re likely to see a strong start to the trading week again. The daily chart continues to show a lot of potential although momentum is getting a bit ahead of itself so I’m still watching for a potential rollover through the low moving average here, albeit low probability:
European shares had another wavering night without much upside, with the Eurostoxx 50 index up 0.1% to close at 3867 points. While price action was slowly moving the market closer away from a pure swing trade and into a reflation rally, its faltering without making any really substantial new daily highs as the 3800 point becomes an anchor. As I’ve been saying for awhile now, it really needs to clear the 4040 point area in the short/medium term as momentum remains neutral:
Wall Street however put in a six week high on solid data although the NASDAQ slipped while the S&P500 finished 0.5% higher at 4543 points. Price action on the daily chart is confirming the short term view, with the double bottom now fully formed at the March lows, and daily overhead ATR resistance well and truly cleared above the 4400 point level. But the next level of resistance at the 4560 point level is the area to watch next:
Currency markets saw no effective change to USD strength but it remains quite strong against Euro which failed to liftoff late on Thursday above the 1.10 handle as the Ukrainian invasion continues to keep a lid on risk taking. The four hourly chart continues to show a retracement down to the 1.10 handle proper with ATR support only slightly below that is now coming under threat. There remains the potential to fallback to the start of war position, as four hourly momentum remains negative while daily momentum is neutral at best:
The USDJPY pair remained elevated after a selloff in the early Asian session saw it retrace back below the 122 level, but it managed to recover this to finish there on Friday night. Internal momentum readings are suggesting a bigger retracement maybe developing as momentum is extremely overbought with price well overextended above the previous trend channel. Short term support at the trailing ATR position at the 121 level is the area to watch this week:
The Australian dollar also remains highly bid, staying above the 75 cent level on Friday night, but starting to lose momentum as this reflation rally is possibly coming to an end. The four hourly chart shows a rounding top pattern building here even as the previous weekly highs are taken out with short term momentum still overbought but inverting. Watch the 74 level acting as strong support in the short term:
Oil markets wavered a little but remain fairly contained with a mild pullback on Friday as Brent crude retraced slightly below the $120USD per barrel level. While this still has the potential to return to the overshoot highs above the $130 level, this is a classic bubble chart with the second peak lower than the first with a potential to flop here down to the $100 level as daily momentum getting reverts back from the overbought zone:
Gold was able to move a little more higher on Friday night after failing to make headway mid week pushing back up to the $1958USD per ounce level. Daily momentum is still positive, but not overbought or indicative of a new trend so watch for a subsequent daily close above the high moving average:
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!wrong on your position, so cry uncle and get out!