Bond yields rebounded overnight as the USD firmed strongly against the currency majors, leaving to wobbly returns on Wall Street despite a decline in PCE inflation numbers. The Australian dollar pulled back to almost breach the 66 level while Euro fell sharply, helping European bourses.
US bond markets saw bounces off monthly lows with 10 year Treasury yields back above the 4.3% while oil prices were volatile in the wake of the latest OPEC meeting with Brent crude pushed back below the $81USD per barrel level. Gold slipped slightly below the $2040USD per ounce level but remains out of correlation with other undollars.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were back in the green with the Shanghai Composite up 0.2% at 3026 points while in Hong Kong the Hang Seng Index was able to lift 0.3% to close at 17042 points.
The daily chart was showing a significant downtrend that had gone below the May/June lows with the 19000 point support level a distant memory as medium term price action remains stuck in the 17000 point range. Daily momentum readings are retracing back to negative settings with price action now retracing back to the October lows:
Japanese stock markets were treading water for a while before a late flourish saw the Nikkei 225 close 0.5% up to 33486 points.
Trailing ATR daily support is a long way below the current bounce that has now exceeded the September highs at the 33000 point level with daily momentum still in the overbought zone but not over-extended. I’m still watching correlations with Wall Street and Yen to see if there is more upside here but a stall is evident:
Australian stocks were the best performers in the region with the ASX200 up more than 0.7%, closing well above the 7000 point support level at 7087 points.
SPI futures are down slightly despite the solid session on Wall Street overnight so we should see the 7000 point level again fight out for either support or resistance. The daily chart was trying to look more optimistic here in the medium term with short term price action filling a hole against the tide and firming somewhat here with a possible reverse head and shoulders pattern forming:
European markets had modest positive sessions across the continent with the Eurostoxx 50 Index lifting some 0.3% to finish at 4382 points.
The daily chart shows weekly resistance at the 4300 point resistance level taken out with this large bounce setting up for further gains if that level can be pushed aside proper. Support at the 4250 level should be quite firm on any pullback and the lower Euro overnight is definitely helping here:
Wall Street was again about divergent with the headline Dow lifting nearly 1.5% while the NASDAQ lost 0.2% and the S&P500 gained just 0.4% to continue this lacklustre trading week, the latter closing at 4567 points.
Short term momentum was overextended as price action bounced strongly off the recent low at the 4100 point level for the potential for a retracement back to trailing ATR support on the four hourly chart building here. Watch the 4500 point level to hold though:
Currency markets are seeing a stronger rebound in USD now following the recent GDP data and despite softer PCE inflation overnight with Euro pushed down nearly 100 pips to just below the 1.0 handle.
The recent consolidation was after the union currency was able to fend off more Fedspeak in recent weeks and remain in a bullish, albeit neutral condition. Support at the recent weekly lows around the 1.06 level was not tested with new short term support upgraded to the 1.08 mid level at a minimum, but watch out here as short term momentum goes from overbought readings to a full retracement below the trend line:
The USDJPY pair was able to make another attempt at a bounceback overnight finishing above the 148 level proper but still below the weekly downtrend line.
Four hourly momentum showed the way with the inability on the recent bounce to get back into overbought mode with price action rolling over and staying in oversold settings. Watch for a breakdown below the 147 level next if it can’t break trailing ATR resistance above:
The Australian dollar continued its minor pullback overnight with USD able to put it somewhere in its place although its still resilient with price action hovering above the 66 cent level to hold on to its three month high.
The Pacific Peso remains under medium and long term pressure but was able to test the mid 63 level following the RBA’s recent rate hike with momentum now overbought and looking very positive as we continue this new trading week, but watch for a potential pullback to the 65 handle proper:
Oil markets remain in flux with the growing conflict in the Middle East and potential OPEC cuts adding to volatility with another wild ranging session overnight that saw Brent crude eventually pushed below the $81USD per barrel level.
After almost reaching $100 in mid September, price was looking to return to the August levels around the $85 area where a point of control had been established before the recent breakout. Daily momentum is still in oversold settings with this failed test of support at the August level setting up for further falls below:
Gold is also holding on to its advances with only minor downside against a resurgent USD overnight, finishing just below the $2044USD per ounce level, after looking well overextended earlier in the week.
Daily support is building strongly again as the four hourly chart shows short term resistance pushed aside and price action on track with a lot of dip buying potential at any retracement toward trailing ATR support:
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!