Wall Street reopened overnight but wasn’t able to move forward despite a late surge following the release of the latest FOMC minutes as European shares pulled back sharply. The USD moved slightly higher against all the major currencies in the wake of the “inflation remains too high” mantra still coming from the Fed, with the Australian dollar finally rolling over after holding strong through the RBA’s recent surprising pause.
US bond markets reopened and the longer end moved sharply higher on the minutes with 10 year yields spiking almost to the 4% level with oil prices also lifting as Brent crude built above the $76USD per barrel level. Gold rolled over after its start of week comeback failed to climb above the recent weekly high at the $1920USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets fell back again after failing to translate their solid start to the trading week with the Shanghai Composite off by more than 0.5% at 3227 points while the Hang Seng Index was down more than 1.5% to 19110 points.
The daily chart is showing hesitation again at the 19000 point level after the previous weekly retracement that bounced off the dominant downtrend (sloping higher black line). Another breakout is required soon with daily momentum positive but not yet overbought:
Japanese stock markets sold off as well but in smaller size, with the Nikkei 225 closing just 0.2% lower at 33339 points. Futures are indicating a further pullback given the lack of a direction on Wall Street overnight.
Trailing ATR daily support had been ratcheting higher but has paused as the market has been going sideways for over a week now with a welcome consolidation. Daily momentum has retraced nicely from overbought settings but a further retracement back down to that support zone is possible to take more heat out of this overextended trend:
Australian stocks took back more than half of their recent gains following the RBA pause with the ASX200 closing 0.4% lower at 7253 points.
SPI futures are further down 0.5% or so given the drop on European markets and lack of direction from a closed Wall Street overnight with a steep recovery required to get back to the previous weekly highs near ATR resistance at 7300 points. This level may just be too far out of reach as medium term price action from the March highs remains somewhat intact as this bounce runs out of steam:
European markets slipped out of hesitation mode into sell mode overnight as the Eurostoxx 50 Index finished nearly 1% lower to 4350 points.
The daily chart is a potential bull trap building again even though weekly support at 4200 points has been continually defended, its weekly resistance at the 4350 points level that remains the true area to beat. While there has been a succession of higher weekly highs with momentum well supported, price action is yet to translate into more upside potential:
Wall Street reopened after its 4th of July holiday with hesitation the name of the game as the NASDAQ dropped some 0.2% alongside the S&P500 with the latter finishing at 4446 points.
The four hourly chart is still showing a robust market that is now coming up against the monthly downtrend from the 2021 highs with another test of the 4500 point level likely. Friday night saw a sustained breakout above the 4400 point level as short term momentum switched to overbought mode and tossed aside overhead resistance but another move higher is required to get momentum really moving:
Currency markets returned to a near one way move in favour of USD overnight in the wake of the FOMC minutes as Euro led the charge rolling over through the mid 1.08 level.
The union currency had previously cooked its own goose here, pulling back below the 1.09 handle after failing to make a new four hourly session high since the start of the trading week, now reverting below the Friday night level. The previous attempted breakout to test the April highs above the 1.10 handle has been thwarted so watch for the 1.0830 support level to come under threat nexT:
The USDJPY pair was able to hold on after a series of tiny pullbacks to steady around the mid 144 level as it preps again to make another record high by breaching the 145 handle in its next move.
The previous consolidation back down to trailing ATR support was looking like repeating itself here mid week, turning into a medium term consolidation but the BOJ pause and Fed Chair Powell’s comment is giving the pair new life. Four hourly momentum however has retraced back from overbought mode as short term price action rolls over in this very steady uptrend:
The Australian dollar has finally succumbed to USD pressure after holding up strong following the RBA pause on Tuesday, with a retracement back to the mid 66 cent level overnight.
The holding action looked like putting the ATR resistance and 200 EMA (black line) levels under threat as it lurked just below the 67 handle but as I’ve been contending for some time now, this was going to be short lived as the Fed is expected to be much more aggressive, with a return below the 66 handle proper likely:
Oil markets were able to actually advance overnight with planned production cuts finally changing sentiment as Brent crude lifted above the $76USD per barrel level again.
Price remains stubbornly anchored around the December levels and the March lows with daily momentum only now switching to positive. 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 failed again to stabilise after its surge at the start of this trading week as the bounce off the $1900USD per ounce level rolled over last night to Friday night’s starting point at the $1915 level this morning.
The daily chart had been showing a continued failure to get back above the psychological $2000USD per ounce level , with short term ATR resistance just too far away on any bounceback. All the signs were building here for a complete capitulation below $1930 but the rollover below the $1900 level could be on again as short term momentum retraces sharply:
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!