Wall Street was able to continues its bounceback overnight as risk markets want to hope and pray that tonight’s US CPI print will actually show inflation slowing and force the Fed’s hand to stop its rate rise agenda. The USD was again basically unchanged against the majors with Euro lifting slightly as the Australian dollar wobbled around the 69 handle. Bond markets are seeing a tightening this time with 10-year Treasury yields pushed down to the 3.5% level while the commodity complex saw oil prices finally lift higher and gain ground as Brent crude almost pushed through the $83USD per barrel level while gold steadied at its new monthly high around the $1880USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were lifting slightly higher going into the close with the Shanghai Composite up nearly 0.3% to remain above the 3100 point level, but reversed at the end to closed 0.2% lower at 3161 points while the Hang Seng Index suffered a similar fate, up more than 1.3% at one stage before closing only 0.4% higher to remain above the 21000 point level. The daily chart continues to look quite boisterous here with a series of step ups since the nadir in October last year as daily momentum remains in extreme overbought mode. It looks like weekly support at the 19000 point level is quite firm as traders bet on a post zero-COVID economic liftoff, but the question is this move sustainable:
Japanese stock markets did much better with the Nikkei 225 lifting nearly 1% to close at 26423 points. There is the potential for a swing long trade to develop further here after bottoming out at the 25000 point level. Daily momentum was oversold and support has held firmly with futures indicating another strong open that should push for another solid close above the high moving average:
Australian stocks surged nicely, absorbing the CPI print with aplomb, with the ASX200 closing nearly 1% higher at 7195 points. SPI futures are up over 0.7% as Wall Street lead the charge overnight. The daily chart has been showing price action and daily momentum in a decline since the start of December with a breakout confirmed if it stays above the high moving average, but it really needs to breakthrough overhead ATR trailing resistance and the 7200 point level next:
European markets had a slight pause in the previous session but pushed aside that hesitation overnight despite the higher Euro with modest gains across the continent. The Eurostoxx 50 Index closed over 1% higher to extend above the 4000 point level, closing at 4099 points. The daily chart showed key overhead resistance at the 3900 point area under contention before the NFP print with daily momentum building up from a swing trade into a proper breakout. The 4000 point level is the key psychological resistance level that could be turned into support going forward:
Wall Street bounced again overnight with the NASDAQ making greater strides, moving up 1.8% while the S&P500 gained nearly 1.3% to close at 3969 points. After breaking the series of lower daily highs since Xmas, price action is pushing further above the dominant medium term trendline after hovering around weekly support at the 3800 point level, and it now punching through the December highs. I’m a bit wary of how overextended this looks however as we await tonight’s CPI print:
Currency markets again saw USD have no real change as Euro consolidated above the 1.07 handle overnight after its brisk melt up trade on Friday. This keeps price action not just above the lower edge of a bearish rising wedge but also above the recent weekly highs and while short term momentum is likely overbought and ripe for a small retracement, it should hold at the 1.06 to 1.07 region as 1.05 becomes very firm support:
The USDJPY pair is also trying to get out of its depressed mode following the post US jobs report retracement move below the 132 handle with a very slight lift overnight. A swing back up to the Xmas highs around the 134 handle was nearly complete before the NFP print on Friday night, matching the previous end of year highs but unable to extend further. This could find more support at trailing ATR support near the 131 mid level or overshoot back down to the start of year level around 129 or so:
The Australian dollar was unable to extend its own recent gains to retrace below the 69 level with a late bounce getting back above that handle this morning. The recent surge back above the 68 handle had found resistance again just below the 69 level with short term momentum now back to the same levels so the question is can the Pacific Peso break through it again or keep oscillating in this broad weekly uptrend channel:
Oil markets have been under pressure as energy prices falter in a warm northern hemisphere but last night saw a snap rally lifting Brent crude almost above the $83USD per barrel level after hovering down near the December lows all week. Daily momentum was looking to return to oversold settings but is starting to pick up again but the overall trend shows price action still below overhead ATR resistance and the dominant downtrend remains in play:
Gold is still being resilient although it couldn’t extend its gains higher overnight, steadying at its recent new monthly high at the $1876USD per ounce level. Trailing ATR support at the $1820 level remains intact which is a very solid sign for more upside potential. The key area to watch as 2023 gets underway is for the $1800 zone to turn into a solid area of support, and hopefully not turn into resistance, with a view to staying above the daily uptrend line:
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!