A firmer than expected PPI inflation print overnight sent Wall Street stumbling again as retail sales also softened greater than expected. This lead to a rise in both the USD and bond yields, muddying the waters on the Fed’s position going into next week’s FOMC meeting. Asian shares had a poor showing yesterday with futures indicating a poor finish to the trading week likely.
The US Dollar Index was up more than 0.5% with Euro taking a big tumble through the 1.09 handle with the Australian dollar following suit to push below the 66 cent level.
10 year Treasury yields rose again to finish at the 4.4% level, while commodities were quite mixed as iron ore kept falling while Brent crude continued its breakout above the $86USD per barrel level. Meanwhile gold remained somewhat firm and on trend, stabilising above the $2160USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets were both down with the Shanghai Composite off by nearly 0.2% while the Hang Seng slumped nearly 1% lower, closing at 16917 points.
The daily chart is starting to look more optimistic with price action bunching up at the 16000 point level before breaking out yesterday, now making a run for the end of 2023 highs at 17000 points with the downtrend line broken:
Japanese stock markets were the odd ones out with the Nikkei 225 closing nearly 0.3% higher at 38807 points.
Trailing ATR daily support was never threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum getting back to overbought readings with a significant breakout. A selloff back to ATR support at 38000 points is now rising as a possibility as I’m cautious of a strong pullback here on any volatility, with futures looking a bit ominous this morning:
Australian stocks were unable to advance with the ASX200 closing 0.2% lower at 7713 points.
SPI futures are down at least 0.8% on the poor showing on Wall Street overnight which should mean a volatile opening start. The daily chart was looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. As I said previously, watching for any continued dip below the low moving average could see a significant pullback but watch ATR support which has been defended so far:
European markets pulled back slightly as confidence disappeared across the continent, with the Eurostoxx 50 Index finishing 0.2% lower at 4993 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly of overbought phase. This was looking to turn into a larger breakout but watch for these falls below the low moving average or ATR support proper:
Wall Street struggled again to push higher with both industrial and tech stocks pulling back as the NASDAQ and the S&P500 both finished 0.3% lower, the latter closing at 5150 points.
The four hourly chart shows a fantastic 2024 trading season so far but this is looking slightly overcooked, so watch for a mild pullback that could occur back towards the trendline around the 5100 point level:
Currency markets switched out of anti-USD mode on the follow up PPI print overnight which was firmer than expected – just like the previous CPI print – sending the USD higher against everything as the mood is now changing that the Fed will actually hold for longer. Euro led the charge on the reversal down through the 1.09 level as it failed to surpass its Friday night highs in the previous session.
The union currency had made another new monthly high with a view to getting above the 1.09 handle as momentum retraces from being overbought in the short term with price action stuck in neutral mode. This pullback could extend to the 1.0820 level or test the 1.08 handle proper on a continued reversion:
The USDJPY pair was still trying to find a bottom after last week’s large downside volatility that saw it break below the 147 level with some upside overnight on the US PPI print as it finishing above the 148 level for the first time in nearly a week.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now getting back into overbought mode while ATR resistance has almost been swept aside in this bounceback, but I remain cautious:
The Australian dollar was unable to get back on trend all week before last night’s reversal that saw it follow the other majors down against USD, falling straight through the 66 cent level.
The Aussie has been under medium and long term pressure for sometime before last week’s breakout but the inability to make a dent after the US CPI print was telling, with no buying support here for the Pacific Peso. Watch for the 66 cent handle to become resistance next if the mid 65 cent level is breached in today’s trade:
Oil markets are breaking out following the attacks on Russian refineries with Brent crude pushing through the $85USD per barrel level overnight, finally exceeding the previous weekly highs to complete a breakout pattern.
After retracing down to trailing ATR daily support at the $77 level, price had been bunching up around the February highs at the $84 level with short term momentum definitely overbought and signalling potential upside from here:
Gold is now definitely stuck after some recent deceleration, still holding well above the $2100USD per ounce level but failing to make new daily highs, closing just above the $2160 level overnight as it hovers above short term support.
Last week daily momentum was nearly off the charts – never a good sign – with short term support at the $2000 level turning to what could be rock solid medium term support but still the critical area to watch ahead on a likely pullback due to excessive volatility:
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!