The USD went down and everything else went up last night in reaction to the latest FOMC meeting – which was a hold – but the details were very very dovish indeed. On the back of the CPI print this gave Wall Street and the entire risk complex a go launch to buy everything while the USD dropped like a stone against the major undollars.
The yield curve also dropped everywhere with 10 year Treasury yields sharply down to the 4% level while oil prices tried to stabilise with a small lift as Brent crude finished at the $74USD per barrel level. Gold of course zoomed higher, finally getting back above the $2000USD per ounce level with a large snap up to the $2026 level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were back in the red with the Shanghai Composite dipped below the 3000 point barrier to close more than 1% lower at 2968 points while in Hong Kong the Hang Seng Index has also lost ground, down 0.7% to close at 16228 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 remained stuck in the 17000 point range before this new losing streak. Daily momentum readings are trying to bounce out of oversold settings but price action continues to fall below the October lows, without much chance of stabilising here:
Japanese stock markets remain unable to translate previous gains into anything sustainable with the Nikkei 225 almost putting in a scratch session to close just 0.2% higher at 32926 points.
Trailing ATR daily support was being threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum now fully retracing from the overbought zone but wanting to neutralise. Correlations with a stronger Yen are in play again as I remain wary of a selloff back to ATR support at 32000 points which so far has been defended strongly:
Australian stocks were able to put in a modest session with the ASX200 lifting further above the 7200 point level to close 0.3% higher at 7259 points.
SPI futures are up more than 1% on the big buy everything rally on Wall Street overnight. The daily chart is again looking more optimistic here in the medium term with short term price action filling a hole against the tide with a possible reverse head and shoulders pattern forming, with the neckline to break at the 7300 point area next:
European markets were again unable to advance from their solid start to the trading week with the Eurostoxx 50 Index putting in another scratch session, finishing 0.1% lower at 4530 points.
The daily chart shows weekly resistance at the 4300 point resistance level taken out with this large bounce setting up for further gains as momentum remains quite firm and nice overbought. Support is now upgraded to at least the 4300 point level with futures indicating a big breakout later tonight on the back of Wall Street’s FOMC led rally:
Wall Street loved the go ahead dovishness with everything rallying across the board as the NASDAQ and the S&P500 both closing nearly 1.4% higher, the latter at 4707 points, extending its new weekly high.
Short term momentum is well into overbought territory with the swing play turning into a monster breakout on the four hourly chart, ready to climb higher. Key support at the 4540 point area has not been breached yet despite this volatile shake out in the past few sessions last week with a further break above the 4800 point level the one to watch:
Currency markets saw a near 1% drop in the US Dollar Index on the FOMC non-decision with Euro leading the way after finding a little life in the previous session, snapping right through the 1.08 handle and almost breaching the 1.09 level.
The union currency is now bouncing well above its recent weekly lows after topping out at the 1.10 level earlier in the previous week, as it failed to maintain momentum above the daily trendline. Short term momentum is now extremely overbought with overhead ATR resistance cleared but likely setting up for a small consolidation here before a re-evaluation of USD strength:
The USDJPY pair had nearly recovered from its recent epic mid week BOJ-led volatility that saw a move straight down to the 141 handle but it has returned thusly in the wake of the FOMC meeting, heading below the 143 level this morning.
Four hourly momentum is now back into oversold mode after not quite getting into positive territory with price action matching the previous lows so we could see a potential follow through to the 141 level:
The Australian dollar was a major benefactor of the USD flip with a huge gain through to the 67 handle overnight that matched the previous weekly highs.
While the Pacific Peso remains under medium and long term pressure this looks like a relief valve being let off with short term momentum now into very overbought territory so watch the 67 level to come under threat next:
Oil markets remain volatile but are reducing in intrasession volatility somewhat with a small upward session overnight on USD weakness seeing Brent crude lift 1% to get back above the $74USD 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 had been failing to get back on track despite a mid week pause and what looked like a solid consolidation well above the $2000USD per ounce level the USD flop is seeing a big move higher overnight, smashing through and heading back to last week’s support level.
Profit taking as switched to position buying so watch for a follow through if price gets back above last week’s resistance level at the $2030 zone:
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!