Another one-two punch of an interest rate meeting and US domestic economic print overnight saw bond yields and USD lower as the BOE met and did nothing while the latest ISM Manufacturing print was solid but unsurprising. Wall Street rebounded while Europe floundered and Asian futures are up slightly as a result. The Australian dollar had a wild ride but remains decidely below the 66 cent level.
10 year Treasury yields continued to fall below the 4% level in the wake of rate cut dampening expectations while oil prices also felt the risk heat with Brent crude falling more than 2% to cross below the $80USD per barrel level. Meanwhile gold had a volatile session, again lifting up through $2050USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets fell in afternoon trade as the Shanghai Composite moved nearly 0.6% lower to 2774 points while in Hong Kong the Hang Seng Index managed a lift higher, closing up 0.5% to 15556 points.
The daily chart still shows the significant downtrend from the start of 2023 with the 19000 point support level a distant memory as medium term price action remains stuck below the 17000 point zone. The recent bounce which saw daily momentum readings almost reach positive settings is just another part of this down phase with a rollover imminent as the inability to reach former support at the 16000 point level is telling:
Japanese stock markets however pulled back in line with Wall Street with the Nikkei 225 closing 0.7% lower at 36011 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. A selloff back to ATR support at 32000 points remains unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here on any volatility:
Australian stocks sold off very sharply, pulled down by the CBA mainly as the ASX200 closed more than 1.2% lower at 7588 points.
SPI futures are up 0.4% or so given the strong rebound on Wall Street overnight. The daily chart is looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. I would still watch for any continued dip below the low moving average and conversely with a breakout above the 7600 point level:
European markets remained in hesitation mode, unable to continue the strong momentum at the start of the week with weak sessions across the continent as the Eurostoxx 50 Index finished 0.2% lower at 4638 points.
The daily chart was showing price action meandering and not yet making a solid attempt at breaching the early December 4600 point highs before this surge with daily momentum now well overbought and price exceeding the highs from December. There are some signs this slowdown could turn into a further retracement later tonight:
Wall Street however rebounded with the NASDAQ up more than 1.3% while the S&P500 gained just over 1% to get back to the start of week position at 4899 points.
Short term momentum has retraced fully out of oversold territory on the four hourly and daily chart, but the 4900 point level remains ominous overhead. Overall support has been strong at the 4700 point level proper but the desire to get up to the 5000 point level is not yet there:
Currency markets were again the most volatile throughout last night’s BOE meeting and ISM print with the USD at first gaining ground before losing overall as Euro almost broke through the 1.09 handle with a strong finish this morning to get back to last week’s closing position.
The union currency remains somewhat 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. After being considerably oversold there was potential building for a swing trade higher and that’s what we have to start with but can it be sustained through the 1.09 level proper:
The USDJPY pair continued its recent breakdown from its sideways bullish/consolidating mood with another selloff down through the 146 level before stabilising somewhat at the 146.30 level that is reached in the previous session.
Four hourly momentum had calmly retraced from being extremely overbought with price firming and support building but the inversion below the 147 handle to a new three week low is very concerning here so watch for the 146 level to come under threat next:
The Australian dollar remains one of the weakest undollars but it was fairly volatile overnight particularly later in the session with a dash down to the 65 cent level then reversed on the ISM print to almost get back to the start of week position.
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. Watch trailing ATR resistance in the short term as I think another valve could be let off soon:
Oil markets failed to stabilise after a solid breakout last week with a continued reversal overnight despite rising tensions in the Middle East as Brent crude retraced down to the $78USD per barrel level.
After clearing the key resistance level at the $80 level, daily momentum had been slightly overbought and ready to engage further to the upside, but the recent stall failed to push through so now saw the key psychological $80 level rejected so watch for the recent lows at $75 to come under threat next:
Gold continued its wobbly climb overnight with a proper move through the $2050USD per ounce level in the previous session looking through the volatility around the FOMC and BOE meetings.
Short term momentum had become overbought before going into last night’s session with the low moving average on the four hourly chart holding steady as strong short term 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!