Hope about resolving the US debt ceiling shenanigans in Congress created hope and risk taking on Wall Street overnight with broad gains that should result in better sessions here in Asia today. The USD still remains the safe haven of choice however as the Australian dollar failed to push above 67 cent level while Euro hovered at weekly lows.
Meanwhile 10 year US Treasury yields rose only slightly higher to remain above the 3.5% level while oil prices were able to rebound on the better mood with Brent crude pushing back above the $76USD per barrel level. Gold remained depressed however, still licking its wounds below the $2000USD per ounce level with no buying support evident.
Looking at share markets in Asia from yesterday’s session where Chinese share markets sold off before recovering slightly into the close, with the Shanghai Composite down 0.2% at 3284 points while the Hang Seng played risk off catchup, selling off more than 2% to again rebuff the 20000 point level, closing at 19560 points.
The daily chart has been showing resistance building above at the 20500 point level as price action wants to return to the start of year correction phase below 19000 points with a failure to make any new weekly highs since early April:
Japanese stock markets were still the best performers, extending into the 1990 closing levels with the Nikkei 225 lifting nearly 1% higher at 30093 points. Futures are indicating a further strong start on the open that will push higher above the 30,000 point level.
Overall the trend remains firmly up – perhaps too unsustainable higher – with price action nowhere near the low moving average area for several sessions, indicating that overall risk sentiment is very one sided. Trailing ATR support keeps ratcheting higher as the 30000 point level is breached with daily momentum extremely overbought here, which could result in a pullback soon on profit taking:
Australian stocks were hesitant once again as local traders continued to press the sell button, with the ASX200 closing nearly 0.5% lower to crack the 7200 point level, finishing at 7199 points.
SPI futures are up at least 0.5% following the big bounce on Wall Street overnight as daily momentum remains positive but not exactly exciting as price action remains sideways at best.
The upside target in the medium term remains the April highs at 7400 points as daily momentum will try to bounce out of the negative zone with a break above the high moving average band and resistance at 7300 points required first:
European markets were mixed across the continent with the German DAX doing the heavy lifting as peripheral stocks fell back with the Eurostoxx 50 Index closing just 0.2% higher to remain slightly above the 4300 point level at 4323 points.
This is another relief rally that may have legs as its much closer to the previous highs than in other risk markets, but also could be pushed over on reassessment of risk and inflation concerns.
The daily chart clearly shows price action caught between strong trailing ATR support at the 4200 point level and weekly resistance at the 4350 points level, but a solid buying base is being developed here:
Wall Street finally put some substantial gains across the board with the NASDAQ up more than 1.2% while the S&P500 rebounded some 1.1%, able to finish at 4158 points to clear out the recent hesitation for a new weekly high.
The four hourly chart was showing how price action had not been ready to engage higher with a lack of a new daily high since mid last week at the 4150 point level or thereabouts. This action blows that out with a likely return to the end of April 4200 level if the debt ceiling nonsense is actually resolved:
Currency markets are continuing their dominant USD trend with a lack of substantive economic data overnight still reinforcing the current view regarding US inflation expectations and ecnomic growth. As a result Euro remained well below the 1.09 handle again, almost breaching the 1.08 level in the process.
Short term momentum on the four hourly chart shows a return to oversold settings with resistance now shifting to former support at that mid 1.09 level proper:
The USDJPY pair is zooming along higher in complete correlation with Japanese stocks with the 138 level now in sight, a level its held to twice before this year already for a big fill.
This breakout may have more legs as short term momentum readings are only slightly overbought although immediate price action trajectory is a little steep. But having cleared trailing ATR resistance at the mid 135 level the scope for further upside is increasing:
The Australian dollar was depressed yet again, bouncing off last Friday’s lows at the low 66 cent level against USD with a small blip to the mid level that is barely holding on as we move into trading this morning.
Price action has now definitively rejected the previous weekly previous highs (upper black horizontal line) as the Pacific Peso continues to reject previous overhead resistance at 67 cents, this move could see that return to the weekly lows below the 66 cent level:
Oil markets are trying to bounce back after a series of breakdowns with a solid session overnight that saw Brent crude move well above the $76USD per barrel level, staving off a new weekly low.
This still keeps price around the December levels (lower black horizontal line) after breaching trailing ATR support previously with daily momentum getting out of oversold mode. A proper reversal will require a substantive close above the high moving average here on the daily chart before threatening a return to $70 or lower:
Gold is now in a major decline phase after failing to recover from its pullback following the NFP print as it continues to breakdown below the psychological $2000USD per ounce level, finishing at the $1980 level this morning.
While there is continued buying support above previous weekly support levels just above the $1980 level, short term momentum had been in the negative zone with the potential to breakdown here as I’ve been explaining for a while, with price action unable to move above the high moving average. Support at the April lows must hold:
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!