Wall Street capped off a volatile week with another poor closing session on Friday night as more domestic US economic data muddied the waters on what direction the Fed will take going into the the FOMC meeting this week. Both USD and bond yields rose with equity futures indicating a poor start to the new trading week here in Asia after the weekend gap.
The US Dollar Index was up just 0.1% for the session but it has been a strong week with Euro again pushed through the 1.09 handle with the Australian dollar also failing to find any support going into this week’s RBA meeting, heading well below the 66 cent level.
10 year Treasury yields rose again to finish near the 4.4% level, while commodities were quite mixed as iron ore kept falling while Brent crude continued its breakout above the $85USD per barrel level. Meanwhile gold pulled back slightly to a new weekly low but is still on its uptrend, stabilising just below the $2160USD per ounce level.
Looking at markets from Friday’s session here in Asia, where mainland and offshore Chinese share markets were again diverging in risk with the Shanghai Composite bouncing back in late afternoon trade, up nearly 0.2% while the Hang Seng continued its slump to fall nearly 2% lower, closing at 16720 points.
The daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session trying to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. However this has been thwarted as monthly resistance levels are kicking in so I expect another attempt this week to break through 17000:
Japanese stock markets were also on the downside with the Nikkei 225 closing nearly 0.3% lower at 38675 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. Last week saw this reversed as momentum goes negative and the selloff back to ATR support at 38000 points taking the wind out of this trend. Watch for any new daily lows as a sign it could go into full reversal:
Australian stocks were unable to advance with the ASX200 slumping more than 0.5% lower to close at 7670 points.
SPI futures are down at least 0.3% on the poor showing on Wall Street on Friday night which could translate into a further slump on the open. 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 continued to dissapate across the continent, with the Eurostoxx 50 Index finishing 0.2% lower at 4986 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 and then pushed much lower with the NASDAQ down nearly 1% while the S&P500 finished 0.6% lower, closing at 5117 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 remain in the thrall of USD following the double CPI/PPI print last week with the latest consumer sentiment figures on Friday night muddying the waters for this week’s upcoming FOMC meeting. Euro led the charge again with a failure to get back above the 1.09 level on Friday night for a new weekly low.
The union currency had made another new monthly high with a view to getting above the 1.09 handle as momentum retraced from being overbought to now oversold at least in the short term with price action stuck below. This pullback could extend to the 1.0820 level or test the 1.08 handle proper on a continued reversion:
The USDJPY pair has now recovered most of its large downside volatility from the previous week that saw it break below the 147 level with more upside on Friday night that saw it return just above the 149 level.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now stuck in overbought mode while ATR resistance has been swept aside in this bounceback, but I remain cautious as we head up to the 150 level:
The Australian dollar was unable to get back on trend all week before the late reversal that held on Friday night below 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 as we head into this week’s RBA meeting:
Oil markets are breaking out following the attacks on Russian refineries with Brent crude pushing through the $85USD per barrel level, 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 below the $2160 level on Friday night 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!