The USD and bond yields fell back amid an absence of further strong domestic US news, which kept Wall Street unsettled as European shares surged higher. A variety of Fed speakers kept markets on edge on expectations of further rate cuts while ECB inflation expectations was mixed. The market reaction to yesterday’s hold by the RBA kept the Australian dollar under the pump as it remains stuck just above the 65 cent level overnight.
10 year Treasury yields fell nearly 10 points, pushing back below the 4.1% level while oil prices stabilised somewhat as Brent crude lifted nearly 0.5% to get above the $78USD per barrel level. Meanwhile gold is still under pressure but holding on just above the $2030USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets bounced back after selling off sharply with the Shanghai Composite moving nearly 3% higher to 2781 points while in Hong Kong the Hang Seng Index finished 4% higher to 16136 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 rollover is now over as price bounced off support at the 16000 point level but is this sustainable as daily momentum is barely positive:
Japanese stock markets however couldn’t find any confidence in the wake of some BOJ banter, with the Nikkei 225 closing 0.5% lower at 36160 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 fell again without a positive lead from the RBA as the ASX200 closed nearly 0.6% lower at 7581 points.
SPI futures are up 0.7% or so given the better sessions 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 got out of their hesitant mood with some positive sessions across the continent as the Eurostoxx 50 Index finished 0.7% higher at 4690 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 still well overbought and price above the highs from December. There are some hopeful signs this could turn into a larger breakout overall:
Wall Street tried to be positive again but failed to hold it in at the end of the session with the NASDAQ down 0.1% while the S&P500 managed a small lift to close at 4948 points.
Short term momentum has retraced fully out of oversold territory on the four hourly and daily chart, now somewhat overbought as the 5000 point level remains the target ahead, despite the “good” economic roadblocks due to the stronger NFP and USD. This looks like a holding pattern albeit with a bullish bias for now:
Currency markets saw a very mild pullback against USD overnight with the DXY down just 0.2% as Euro remained on the floor following Friday’s NFP print, holding well below the 1.08 handle at a new weekly low.
The union currency had been somewhat weak before Friday night, after tracking sideways for nearly three weeks as short term momentum switched to negative as price action remained contained well below trailing ATR resistance. This is not looking good with the 1.07 handle to come under threat next if the 1.0720 area is broken:
The USDJPY pair had the biggest move after failing to hold on to its meltup from Friday night with a push down to the 148 level as short term momentum couldn’t be sustained following the jobs print.
As I warned yesterday, four hourly momentum could retrace here as this meltup pattern ran out of steam with the 148 level proper remaining as strong short term support, but this could fold further in Asian trade today:
The Australian dollar remains one of the weakest undollars but its trying to find some life after overcorrecting before yesterday’s RBA print which saw it lift back above the 65 handle in response to the hold condition, but without much confidence.
The Aussie has been under medium and long term pressure for sometime with the latest rally just a relief valve being let off before this realignment back to a strong USD with rate cuts a possibility later today. There are some signs of deceleration here so watch the 65 level for a possible inversion:
Oil markets are trying to stabilise yet again after the solid breakout last week with a small tick higher overnight as Brent crude lifted some 0.5% to get back above 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 remains somewhat wobbly although it managed to lift slightly overnight to get back above the $2030USD per ounce level after failing to hold on to its short term rally following the FOMC and BOE meetings.
Daily momentum is back to negative settings and short term support at just above the $2000 level will likely come under threat next here as the USD gains further strength:
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!