Risk sentiment soared overnight on progress in peace talks between Ukraine and Russia, with oil prices coming back and USD losing ground as European shares were highly bid across the continent. The Federal Budget release last night locally kept the Australian dollar elevated, while USD lost significant ground against both Euro and Yen. Volatility in interest rate and bond markets remained high with big range trading in 2 year and 10 year Treasuries, the latter pulling back sharply from the 2.5% level as the yield curve flattened significantly. Commodities were somewhat mixed as oil prices slumped, with Brent crude almost down to $100USD per barrel at one stage while gold also broke below the $1900USD per ounce level before recovering later in the session.
Bitcoin paused in its surge, halting at the $48K level overnight but still pushing through new monthly highs. Daily momentum is considerably overbought, looking to revert to mean here after having cleared resistance at the January and February highs, but the $50K level remains under threat next:
Looking at share markets in Asia from yesterday’s session, where Chinese shares started off okay but lost their confidence mid session, with the Shanghai Composite closing 0.3% lower to 3203 points while the Hang Seng Index bounced back again to climb 1%, closing at 21927 points. The daily chart is looking better here, having been supported at the 21200 level but needs to clear very strong resistance at the 22600 point level next as momentum is only marginally positive:
Japanese stock markets also rebounded with the Nikkei 225 closing more than 1% higher at 28252 points. Futures are indicating a strong start on the open despite a stronger Yen overnight as risk sentiment correlation increases. Price action and daily momentum readings overall 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 a great session with the ASX200 closing up 0.7% to 7464 points as Budget speculation builds. SPI futures are up more than 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 and the high Australian dollar might put a dampener on things, but it seems the calendar year falls have been filled:
European shares had stonking sessions on the peacetalk speculation with broad moves higher across the continent, with the Eurostoxx 50 index up nearly 3% to close at 4002 points. This is looking more and more firm each session with the bunching up of price action around the 3800 point zone indicating this breakout potential. The next level to clear is the 4040 point area in the short/medium term as momentum flips into nicely overbought zone:
Wall Street continued the rally with the NASDAQ up more than 1.8% while the S&P500 finished 1.2% higher at 4631 points. Price action on the daily chart continues to confirm 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. The target here is the December higs at the 4800 point level next:
Currency markets saw a drop in USD strength mainly due to a big surge in Euro as the possibility of progress in peace talks between Ukraine and Russia took sentiment in the union currency much higher, lifting back to the previous weekly high at the 1.11 handle. This very fast reaction is likely overdone so watch for the high moving average on the four hourly chart that has to hold here to make this sustainable, or any bad news from the peace talks breaking down will send it swiftly back to previous weekly support around the 1.09 level:
The USDJPY pair is acting a bit like oil prices in reaction to the machinations in Ukraine, with a slump below its very close support levels to retrace back below the 123 handle overnight. Momentum had been extremely overbought with price well overextended above the previous trend channel and this volatility is not unusual at all. Trailing ATR support has been found wanting with my contention of a nasty pullback coming soon still standing:
The Australian dollar remains contained after retracing slightly below the 75 cent level before the Budget last night, having lost momentum but holding above ATR support since the start of the trading week. 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 continue to waver as signs of peace and better energy security for Europe take the edge of speculative price increases. Brent crude had a wide ranging session, eventually finishing at the $108USD per barrel level. As I said previously, the charts of oil leading up to and through this conflict are classic technical bubbles with the second peak lower than the first with the potential to flop here down to the $100 level continuing to rise as daily momentum getting reverts back from the overbought zone:
Gold was slammed down below the $1900USD per ounce level on the peace talks, before climbing back up to the weekly support, closing the night out at the $1919USD per ounce level. This is an ominous move with support not looking that strong here at the $1900 level, with a close above the high moving average at the $1930 area required fast or this will rollover swiftly:
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!