Risk sentiment improved on both sides of the Atlantic overnight as traders start to position themselves for the US unemployment print on Friday amid a more hawkish Fed. The USD saw some oscillation around Yen while Euro wavered around the 1.10 handle while the Australian dollar retraced below the 75 handle. Volatility in interest rate and bond markets is where the action is with the 10 year Treasury pulling back from the 2.5% level. Commodities were somewhat mixed as oil prices slump around 7%, with Brent crude down to $106USD per barrel while gold fell back to $1920USD per ounce and other industrial metals were largely unchanged.
Bitcoin continued it start of week surge after being contained around the $41K level last week, making another new monthly high pushing through the $48K 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 yesterday’s session, where Chinese shares started poorly but were able to fill in by the close with the Shanghai Composite finishing with a scratch session at 3212 points while the Hang Seng Index has bounced back after its rout on Friday to climb 1.3% higher to close at 21685 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 however went the other way with the Nikkei 225 down 0.7% to 27943 points. Futures are indicating a flat start again even though Yen remains extremely weak, with the dual risk taking overnight possibly aligning with more risk taking locally today. Price action overall 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 put in a scratch session after starting well enough, with the ASX200 closing only 0.1% higher to 7412 points. SPI futures are up nearly 0.5% or so in line with Wall Street so we should see a better start this morning. 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 played risk catchup with the continent moving ahead, leaving the FTSE behind, with the Eurostoxx 50 index up more than 0.5% to close at 3880 points. This is looking a bit former now with a bunching up of price action around the 3800 point zone which is indicative of a potential breakout soon. However ti really needs to clear the 4040 point area in the short/medium term as momentum remains neutral:
Wall Street continued its rally with the NASDAQ up more than 1% while the S&P500 finished 0.7% higher at 4575 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. Resistance at the 4560 point level is seemingly cleared now with momentum picking up:
Currency markets saw no effective change to USD strength but it remains quite strong against Euro which continues to fail to make any headway. The union currency remains below the 1.10 handle with the four hourly chart continuing to show price anchored at ATR support. 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 zoomed higher in the London session before retracing back below the 124 level in what is one of the worst months of trading history in Yen. Momentum is extremely overbought with price well overextended above the previous trend channel and getting quite volatility.. Short term support at the trailing ATR position is supposedly at the 123 level now, having jumped two handles but I think we could be in for a nasty pullback soon:
The Australian dollar remains lofty but retraced below the 75 cent level overnight after losing momentum as this reflation rally slowly unwinds. The four hourly chart continues to develop a rounding top pattern building here even as the previous weekly highs are taken out with short term momentum no longer overbought. Watch the 74 level acting as strong support in the short term:
Oil markets had been wavering a little but were fairly contained on Friday but have now started the week with a splash as Brent crude fell nearly 7% to retrace back to the $106USD per barrel level. All charts of oil are classic bubbles 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 retraced later in the session after matching the previous two daily highs, falling back to the $1922USD per ounce level. Daily momentum is still positive, but as I said yesterday, not overbought or indicative of a new trend so this is not unexpected. Watch for support that must hold here at the $1900 level:
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!