See the latest Australian dollar analysis here:
Risk sentiment continues to flip flop on economic releases and macro events with US services PMI surveys surprising to the upside alongside European measures as well, with some calming words from Fed officials helping. Wall Street rallied strongly, up nearly 2% across the board which will provide a catalyst for more buying in the region today. Currency volatility has not yet abated, with the USD continued to regain its recently lost strength with Euro still in reversal mode while the Australian dollar has failed to climb back above the 70 level following its post-RBA rate rise walloping. Bond markets saw roundtripping in yields with 10 year Treasuries hovering around the 2.7% level with more than 100bps in rate rises still predicted by the end of 2022, with 65bps at the next Fed meeting firming. Commodities remain volatile as oil prices pushed to a three month low, as Brent crude can’t get back above the $100USD per barrel level while gold rose slightly.
Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets were looking to hold on to scratch sessions despite increased tensions of Taiwan but sold off into the close, with the Shanghai Composite closing down 0.7% to 3163 points. Meanwhile the Hang Seng Index held above water yet was unable to cross back above the 20000 point barrier, finishing around 0.4% higher at 19767 points. Sentiment continues to dice with death on the daily chart with considerable overhead resistance and daily momentum readings remaining solidly oversold. It looks like the May lows will come under pressure soon – but watch those long tails on the recent daily lows which maybe some support building:
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Japanese stock markets came back in similar fashion with a weaker Yen helping, with the Nikkei 225 closing 0.5% higher to 27741 points. Futures on the daily chart are suggesting this pause could be turning into a breakout to finally clear resistance at the previous highs at 28000 points. Daily momentum has retraced from its overbought status and while price recently made a new weekly high, the overall monthly/weekly downtrend (sloping black line above) is still in play:
Australian stocks pulled back slightly in response to overnight volatility with the ASX200 closing 0.3% lower as it continues to reject the 7000 point level, closing at 6975 points. SPI futures are up 0.5% or so on the rally on Wall Street overnight. The daily chart looks quite firm with a short term breakout situation as it tries to convert the recent bottom into a new uptrend. Daily momentum remains nicely overbought with the potential for more upside action to get through the 7000 point level:
European stocks were at first hesitant to re-engage the bullish trend of last week but eventually rallied alongside Wall Street, with the Eurostoxx 50 index lifting more than 1.3% to finish at 3732 points. The daily chart shows price action moving sharply higher through overhead resistance as daily momentum remains in overbought mode. The May highs at the 3850 point level remain the next target:
Wall Street had rises across the complex with the NASDAQ lifting more than 2.5% while the S&P500 gained some 1.5%% to finish at 4155 points. Price action is now building once again above previous key resistance at the once elusive 4000 point level as it attempts to get back to the May highs with short term momentum retracing from its overbought mode but still quite high:
Currency markets continue to see more defensive plays in USD as it pushed higher against most of the majors overnight. Euro pulled back to the mid 1.01 level as it continues its short term deflation back to the medium term middle of road trend. I still contend there’s a potential short term top brewing as resistance builds past the mid 1.02 level:
The USDJPY pair was pushed higher again after recently bottoming out briefly at the 130 level to almost get back to the 134 handle early this morning. This has been a volatile period for Yen and normally this move would provide a tailwind for Japanese stocks but correlations are all over the place, with more Yen buying making sense as part of rising Asian tensions as well. Watch for any short term move firming above trailing ATR resistance as four hourly momentum begins to look overbought:
The Australian dollar is still trying to fill in its recent falls post the RBA interest rate meeting and indeed it did climb back against what was a stronger USD overnight, almost reaching the mid 69 level. This may not be enough for the Pacific Peso as short term momentum and price action is indicating a swing play only for now:
Oil markets have failed to recover after Brent crude diced with the $100USD per barrel level for sometime now, pulling well below that level overnight to get back on the June downtrend. Price action failed to continue the previous week’s bounce off the $90’s lows, with the downtrend line yet to be beaten from the June highs and daily momentum couldn’t get out of its negative funk, so $100 level has turned into resistance here:
Gold stabilised overnight after its recent run that saw it almost reach the $1800USD per ounce level on hawkish comments from the Fed, now having retraced back to a still respectable $1763 level. The solid move that has pushed aside short term resistance to turn this bottoming action into a proper relief rally, was yet to clear daily ATR trailing resistance, or the actual uncle point at the $1800USD per ounce level that must be beat to call this a proper medium/long term bottom. On the four hourly chart, watch trailing ATR support that could come under stress:
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!