Following the Federal Reserve meeting in the previous session, the USD and bond yields rebounded overnight with the Bank of England holding fire while the Swiss Central Bank put in a surprise rate cut. This increase currency volatility particularly with Euro while Wall Street was able to eke out a new high, although equity futures are looking a little wobbly for the final session here in Asia today.
The US Dollar Index was up more than 0.6% for the session as a result of the volatility with Euro unable to recover from its retreat below the 1.09 handle while the Australian dollar also pulled back significantly to remain below the 66 cent level.
10 year Treasury yields rose slightly to return to their four month high, while Brent crude pulled back again to just above the $85USD per barrel level. Meanwhile gold had significant intrasession volatility to eventually close just below the $2200USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets were trying to get back on track with the Shanghai Composite closing dead flat while the Hang Seng was up nearly 2% to 16909 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 big movers with the Nikkei 225 also closing more than 2% higher at 40815 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 were the laggards again but its all relative as the ASX200 gained more than 1% to close at 7781 points.
SPI futures are down more than 0.2% despite the solid showing on Wall Street overnight. 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 loved the BOE and CNB volatility with significant moves higher across the continent, with the Eurostoxx 50 Index finishing 1% higher at 5050 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 is looking to turn into a larger breakout as futures indicate another new high for tonight’s session:
Wall Street continued its upbeat mood with minor moves higher as the NASDAQ finished up 0.2%while the S&P500 gained just over 0.3%, closing at 5241 points.
The four hourly chart shows a fantastic 2024 trading season so far even it if looks slightly overcooked, with the Fed basically giving the go ahead for more upside from here, but momentum is extremely overcooked to say the least, with retracement possible tonight:
Currency markets saw the most volatility overnight in the wake of the BOE and Swiss meetings, with an initial breakout against USD that turned into a big reversal on the Swiss cut with most of the majors retreating against King Dollar. Euro led the charge with a break back below the 1.09 level.
The union currency exhibited high volatility intrasession but looking through it seems support is anchored at the mid 1.08 level which is where it ended up this morning. Watch for a potential break below that level in tonight’s session:
The USDJPY pair was able to nearly get back to its pre-Fed meeting high with a minor bounce up through the mid 151 level overnight.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now trying to get back into overbought mode while ATR support remains firm at the 150 handle proper:
The Australian dollar wanted to return to its weekly highs but failed again with a pullback to short term support and below the 66 cent level as it now dices with longer support levels.
The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while this surge looked strong, it wasn’t overbought on the four hourly chart and had not surpassed support from last week’s consolidation phase. Watch for the 66 cent handle to firm as resistance here:
Oil markets are pausing their breakouts following the attacks on Russian refineries with Brent crude pushed slightly lower overnight to settle just above the $85USD per barrel level, still well above 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 had previously surged above the $2200USD per ounce level in the wake of the soft Fed meeting outcome but this has been thwarted somewhat on the Swiss cut with a very volatile session that has seen it return back to the $2180 level for a more sustainable trajectory.
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!