Overnight saw another consolidation phase for risk markets, with US bond yields rising slightly while the USD pulled back but still held sway over the currency majors. Wall Street stumbled again while European stocks lack confidence. The Australian dollar remains under the pump but is holding on at the 65 cent level again.
10 year Treasury yields rose slightly to the 4.25% level, still a little off of their four month high, while Brent crude absorbed the weekend gap with a slightly lift to the $86USD per barrel level. Meanwhile gold reduced in volatility somewhat to eventually close just below the $2170USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets broke down after failing to get back on track with the Shanghai Composite off by more than 0.7% while the Hang Seng is down by just 0.2% at 16473 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 worst performers in the region, with the Nikkei 225 closing more than 1% lower at 40414 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 best performers with the ASX200 closing some 0.5% higher to 7811 points.
SPI futures are down nearly 0.4% following the poor 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 were quite mixed overnight but the German DAX saved the day with the Eurostoxx 50 Index eventually finishing 0.3% higher at 5044 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly out of an overbought phase. This is looking to turn into a larger breakout although futures indicate another pause for tonight’s session:
Wall Street couldn’t continue its upbeat mood from last week as the NASDAQ was off by 0.3% while the S&P500 lost about the same amount, closing at 5218 points.
The four hourly chart hows this slight consolidation back to a more sustainable uptrend with short term support coming up soon while equally short term momentum retraces to a neutral setting:
Currency markets saw the most volatility last week 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 that almost resulted in a test of the 1.08 level on Friday night.
The union currency seems to have support anchored at the 1.08 level which is where it ended up but the short term price action is suggesting a breakout is possible here as momentum is well overextended:
The USDJPY pair was able to nearly get back to its pre-Fed meeting high with a minor bounce up to but not above the mid 151 level on Friday night.
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 at the 65 cent area.
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 higher to settle just above the $86USD 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 with a series of very volatile sessions that has seen it return back to the $2170 level for a possibly 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!