See the latest Australian dollar analysis here:
Risk sentiment was steady overnight as markets remain in a holding pattern waiting for the next Federal Reserve interest rate hike at the upcoming FOMC meeting this week. Both European stocks and Wall Street had scratch sessions amid lower volatility while on currency markets the USD pulled back slightly although it clawed back some ground lost against other safe havens like Yen, as Euro was flat above the 1.02 handle while the Australian dollar remained above the 69 cent level. Bond markets saw some loosening of yields with 10 year Treasuries lifting slightly to the 2.84% level, as US interest rate futures continue to indicate a 75bps rate rise at the next Fed meeting. Commodity prices were still volatile with Brent and WTI crude oscillating around the latest Ruzzian machinations while copper gained nearly 2% again while gold held on to its recent gains at the $1720USD per ounce level.
Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets slid into the close with the Shanghai Composite down 0.6% to 3250 points while the Hang Seng Index was all set to lose 1% before a recovery saw it close only 0.2% lower at 20562 points. Sentiment continues to wane on the daily chart with considerable overhead resistance and daily momentum readings remaining oversold as the previous swing play reverts back to the downtrend although some support is building at the 20000 point level:
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Japanese stock markets finally reverted after a week long surge, with the Nikkei 225 closing down 0.8% to 27699 points. The daily chart is suggesting this breakout may not have the legs to continue, with resistance building at the previous highs at the 28000 point area as daily momentum reverts from its overbought status. Although price has made a new weekly high, this market is in a pause phase for now:
Australian stocks had a scratch session with the ASX200 closing a handful of points lower, still unable to cross back above the 6800 point level, finishing at 6789 points. SPI futures are up nearly 0.4% which is better than expected given the holding pattern on overseas markets. The daily chart is still showing a breakout situation in the short term after trafficking sideways with a potential bottom forming here as support firms around the 6600 point level. Daily momentum is now nominally positive with the potential for upside action building with a breakout above short term resistance but not yet threatening deeper overhead ATR resistance near the 7000 point level:
European stocks were again somewhat mixed in their risk taking, but rallied towards the end of the session with the Eurostoxx 50 index closing 0.2% higher at 3604 points. The daily chart shows price action trying to move higher through overhead resistance as a bottom is trying to form here at the 3400 point level. Daily momentum is now overbought and ready to engage higher, but watch for a potential rejection at ATR resistance at the 3600 point level:
Wall Street was also mixed with the NASDAQ still dragging down, finishing 0.4% lower while the S&P500 finished just 0.1% higher at 3966 points, still unable to close above that elusive 4000 point level. The four hourly chart is showing a pause in the next stage of a potentially sustainable recovery above the 4000 point level with Friday night’s action looking like a new rollover as short term momentum retraces from its overbought status. As I warned last week, a failure here to get back above 4000 will likely see a retracement back to the end of June lows at 3730:
Currency markets continue to reduce somewhat in volatility post the ECB rate hike, as traders await this weeks FOMC decision. USD is still falling back against most undollars with Euro remaining firm above the 1.02 handle in an obvious holding pattern. The four hourly chart shows a potential short term top brewing as resistance builds past the mid 1.02 level with the medium term trend still broadly down against the USD, so watch for any retracement below the low moving average here:
The USDJPY pair is trying to clawback its big losses following the ECB hike but internal weakness is keeping it contained well below the 137 level. The real level to watch here is former ATR support at the 137 mid level that has turned into resistance. Oversold momentum is providing a classic swing play here up towards the high moving average on the four hourly chart, but nothign to get excited about just yet:
The Australian dollar continues to lift higher with the weekend gap providing the impetus for another rally yesterday as it lifted to the mid 69 level, matching its Friday night highs. The short term moves look good for the Pacific Peso as momentum gets into the overbought zone before we head into the next Fed meeting, which I contend is a big bull trap. Resistance is firming here at the 70 level, so watch for a possible retracement below the 69 level on hesitation:
Oil markets are failing to recover with another move below the $100USD per barrel level for Brent crude as some volatility around the Russian cut to gas supplies to the EU provides a minor recovery. Price action failed to continue the previous week’s bounce off the $90’s lows but the downtrend line is yet to be beaten and nor has daily momentum got out of its negative funk, so watch for the $100 level to turn into resistance here:
Gold had a shaky start to the trading week with an attempt to push through the Friday surge high thwarted later in the session, as it retraced back to the $1719USD per ounce level. The Friday surge was after making a new monthly low that created somewhat of a bottoming process and while in the short term ATR resistance has been cleared this is only a swing play as the downtrend still looks well entrenched:
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!