Despite both Fed and ECB officials wary of interest rate cuts, risk markets were able to bounce back overnight with solid gains on both sides of the Atlantic. Wall Street pushed higher alongside bond yields and the USD which continued to strengthen against most of the major currency pairs. Euro remains well below the 1.09 handle while the Australian dollar is dicing with the 65 cent level.
10 year Treasury yields lifted nearly 10 points again to extend through the 4% level with chances of a March rate cut starting to firm while oil prices were able to lift slightly as Brent crude headed above the $79USD per barrel level. Gold also bounced back after recently almost breaking below the $2000USD per ounce level but is still under the thumb of King dollar.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets are pulling back sharply again as the Shanghai Composite falls nearly 1% to 2808 points while in Hong Kong the Hang Seng Index had a solid rebound, but still relatively small given the large losses recently, up 0.8% to 15411 points.
The weekly chart amply shows the significant downtrend from the start of 2023 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 back into oversold settings as price action returns to the October lows, with little chance of stabilising here:
Japanese stock markets are putting in a scratch session after a two day retreat with the Nikkei 225 down marginally to 35467 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 remaining extremely overbought. Correlations with a stronger Yen are breaking down here with a selloff back to ATR support at 32000 points unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here:
Australian stocks are still failing to gain any positive momentum, with the ASX200 losing more than 0.6% to extend below the 7400 point level, closing at 7346 points.
SPI futures are up nearly 1% given the rebound on Wall Street overnight. The daily chart is no longer looking very optimistic here in the medium term with short term price action however suggesting a possible reversal underway as daily momentum starts to wane and resistance at the 7600 point level builds. Watch for any continued dip below the low moving average:
European markets have been able to find some confidence with some broad gains across the continent as the Eurostoxx 50 Index finished over 1% higher at 4453 points.
The daily chart shows weekly support breaking at the 4480 point level as a failure to make a new high above the early December 4600 point level is starting to drag overall momentum down with a full retracement. Futures are indicating a stronger session ahead:
Wall Street was able to bounce back strongly all session with the NASDAQ up over 1.3% while the S&P500 gaining nearly 0.9% to close at 4780 points.
Short term momentum is now into oversold territory on the four hourly chart, with trailing ATR support coming under threat soon. Overall support has been strong at the 4700 point level proper but its obvious that the December highs were building as very strong resistance:
Currency markets were subdued again with King Dollar not moving around much despite some intrasession volatility with Euro, which tried to break out above the 1.09 handle proper before being thwarted later this morning..
The union currency had been still looking weak here after tracking sideways for nearly three weeks as short term momentum switched to negative as price action remains contained well below trailing ATR resistance. While considerably oversold now it could fall further here:
The USDJPY pair is consolidating after its recent big surge helped with a steady selloff in Yen resulting in the 148 level taken out.
Four hourly momentum has calmly retraced from being extremely overbought and price firms here with support building at the 147 handle below. A welcome pause as there is potential for more upside here:
The Australian dollar is still the weakest undollar as traders await the February RBA meeting with the recent breakdown stalling but not providing any impetuous to move higher as it remains well below the 66 handle.
The Aussie has been under medium and long term pressure for sometime with the latest rally just a relief valve being let off with short term momentum returning to oversold territory as traders still have another month for the RBA to come back from holidays. As I said previously, if you’d turn this chart upside down and you’d be bullish:
Oil markets saw a mild uptick that could be the start of a potential breakout given the recent amount of low volatility with Brent crude pushing up over the $79USD per barrel level overnight for the first time in a couple of weeks.
While still well contained below the key $80USD resistance level, daily momentum is now out of negative settings and setting up for a potential swing higher so watch carefully for a breakout soon:
Gold bounced back after almost falling through the $2000USD per ounce level with a return to the previous weekly low just above the $2020 level overnight.
While a good start, this bounceback is not yet enough to get back above the dominant downtrend with support at the $2040 level still hovering overhead as resistance. Watch for a potential return to the previous lows just above the $2000USD per ounce level next:
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!