Risk sentiment soured again overnight, as expectations of any ceasefire of progress in Ukraine dwindling with European shares and then Wall Street both losing over 1% for the night. The defensive USD rose against most of the major currency pairs although the Australian dollar remains stubbornly high. Volatility in interest rate and bond markets abated somewhat in the wake of the US PCE release with the 10 year Treasury pulling back to the 2.3% yield level while commodities saw big shakeups in oil prices as the US released its strategic oil reserve. Both WTI and Brent crude lost nearly 5%, but both remain above the $100USD per barrel level while gold tries to bounce off support at the $1900USD per ounce level again.
Bitcoin continued its own pullback after recently halting at the $48K level after making a new monthly high, falling back to weekly resistance at the $45K level. Daily momentum was considerably overbought, so this reversion to mean here after having cleared resistance at the January and February highs is not unexpected, but still keeps the $50K level as the next target:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares started flat but drifted lower into the afternoon session, with the Shanghai Composite closing down 0.5% to 3252 points while the Hang Seng Index has pulled back again, falling 1% to close just below the 22000 point level. The daily chart is still looking fairly resilient 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 were in retreat again with the Nikkei 225 down 0.7% to 27821 points. Futures are indicating another pullback on the open because of the souring risk sentiment plus a stronger Yen overnight. While daily momentum remains slightly overbought, price action looks topping indeed, as it reverts back to weekly resistance at the 27500 point level and may even fall below the previous February highs. Watch for support to hold at the 27000 point level:
Australian stocks were the relative winner in the region with the ASX200 closing 0.2% lower to just retrace below the 7500 point level. SPI futures are down more than 0.5% or so, still somewhat resilient compared to Wall Street. The daily chart continues to show a lot of potential with daily momentum still quite strong but now we come up against the former highs from December last year, combined with a too high Australian dollar which could stall further advances here:
European shares had poor sessions across the continent, with the Eurostoxx 50 index down 1.4% to close at 3902 points. Recent price action had looked better each session but the mid week slump is now threatening the uptrend line, and pulling back from the 3800 point zone that had some indications of breakout potential:
Wall Street followed suit with similar falls with the NASDAQ and the S&P500 both finishing 1.5% lower, the latter closing at 4530 points. Price action on the daily chart is showing a rebuff of the late January highs here with momentum only slightly overbought. While the next medium term target remains the December highs at the 4800 point level, watch for the low moving average to come under threat next if sentiment continues to sour:
Currency markets are seeing a resurgence in USD strength mainly due to defensive risk sentiment but also firming economic data that still supports the Fed’s move to continue to tighten interest rates. The big surge in Euro has almost been fully reversed with overnight moves taking it back to the mid 1.10 level. As I said earlier in the week, the prior action was likely overdone with 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 slowly consolidating here at the 121 handle, after failing to find any further buying support. Four hourly momentum has now reverted back to completely neutral settings after being extremely overbought, but holding here. Watch for an obvious breakdown below the 121.20 level next:
The Australian dollar remains contained, maintaining its retracement slightly below the 75 cent level, 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 are at the behest of big macro moves again with the release of the US strategic reserve overnight, despite some bad signs about energy security for Europe and Ukrainian peace talks. Brent crude sold off throughout the session, eventually finishing nearly 5% lower at the $105USD 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 also remains contained above the $1900USD per ounce level, having a very mild uplift overnight to finish at the $1937USD per ounce level but failing to make a new daily breakout above the high moving average. Support is looking stronger here at the $1900 level, but I still maintain that a close above the high moving average at the $1930 area is required soon 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!