Wall Street was able to extend its solid start to the new trading week with confidence building going into the Fed’s next interest rate meeting. The US Dollar Index was up more than 0.2% for the session mainly due to a selloff in Yen following the BOJ meeting yesterday with Euro unable to recover from its retreat below the 1.09 handle with the Australian dollar also failed to find any support after yesterday’s dovish RBA meeting, almost going below the 65 cent level.
10 year Treasury yields pulled back slightly from their four month high, while commodities were quite mixed as Brent crude continued its breakout above the $87USD per barrel level. Meanwhile gold is trying to recover from its recent pullback to stabilise below the $2160USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets failed to get back on track with the Shanghai Composite falling in late afternoon trade, down over 0.7% while the Hang Seng has lost more than 1.2% to close at 16529 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:
Japanese stock markets were the biggest movers again due to the BOJ with the Nikkei 225 closing more than 0.6% higher to breakout above 40000 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. This reversal has given new life here however:
Australian stocks liked the RBA change with the ASX200 advancing some 0.4% to close at 7703 points.
SPI futures are up slightly as they try to follow the solid showing on Wall Street overnight with a lower Australian dollar helping as well. 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 were able to bounce back slightly as confidence returned across the continent, with the Eurostoxx 50 Index finishing 0.5% higher at 5007 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 any falls below the low moving average or ATR support proper:
Wall Street continued its upbeat mood and surged forward again with the NASDAQ up 0.4% while the S&P500 finished 0.6% higher, closing at 5178 points.
The four hourly chart shows a fantastic 2024 trading season so far even it if looks slightly overcooked, so watch for a mild pullback that could occur back towards the trendline around the 5100 point level if tonight’s Fed meeting expectations aren’t met:
Currency markets remain in the thrall of USD as expectations rise for tonight’s latest Fed meeting, after absorbing yesterday’s RBA and BOJ results, with both the Australian dollar and Yen falling against King Dollar. Euro led the charge again with a failure to get back above the 1.09 level, holding on to its 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 all of its downside volatility from the previous week with a soaring move above the 150 handle yesterday on the BOJ rate decision, getting back to a four month high.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now well into overbought mode while ATR resistance has been swept aside in this bounceback. I remain cautious of a potential pullback here as its been a little too much, too fast:
The Australian dollar fell below the mid 65 cent level following the dovish RBA meeting and stayed their overnight to almost cross below the 65 handle proper.
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 firm as resistance here:
Oil markets are continuing their breakouts following the attacks on Russian refineries with Brent crude pushing through the $87USD per barrel level, exceeding the previous weekly highs.
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 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!