Wall Street got a big boost on Friday night from a hot non-farms payroll/US jobs print that initially saw the USD spike higher before the details were absorbed in full. While the hot report will dampen rate cut expectations, other macro considerations including the higher oil price are keeping risk sentiment in check. Most undollars finished the session where they started with the weakest like the Loonie and Australian dollar falling back slightly.
10 year Treasury yields had a small spike with a lift up through the 4.4% level while Brent crude put in a pause, closing the week out just below the $91USD per barrel level to hold on to its new monthly high. Meanwhile gold just kept on lifting higher as it pushed through the $2300USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland and offshore Chinese share markets reopened from their mid week holiday with the Shanghai Composite down slightly to 3060 points while the Hang Seng Index was off more than 0.7% for another weekly low.
The Hang Seng Index 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 as it tried 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, although support is firming at the 16400 point area:
Japanese stock markets suffered with a big one day fall as the Nikkei 225 closed 2% lower at 38969 points.
Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term resistance has been defended with short term price action now retracing to support at the 39000 point level. Watch the 38000 level for signs of a true breakdown:
Australian stocks fell sharply but were able to recover slightly with the ASX200 closing 0.7% lower to 7773 points.
SPI futures however are up at least 0.5% on the big surge on Wall Street from Friday night. 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 all fell before the NFP print with the German DAX pulling everything down as the Eurostoxx 50 Index finished more than 1% lower at 5014 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs but daily momentum retracing well out of an overbought phase. This was looking to turn into a larger breakout but a retracement back to short term support could give the market some breathing room. Futures are now indicating a consolidation of Friday night’s losses given the rally on Wall Street thereafter:
Wall Street loved the solid NFP print with rises across the board with the NASDAQ up more than 1.2% while the S&P500 also put on more than 1% to eventually finish the week just above the 5200 point level.
The daily chart previously showed a consolidation that could have turned into a proper reversal here as price action broke below short term support as momentum became somewhat oversold. As I said previously, a break below the 5240 point area has setup for further downside but this has been thwarted so far:
Currency markets reacted relatively calmly to the jobs print on Friday night with the usual volatility around local points of control. The anti-USD phase is still in check but some pressure is now mounting given the strong result with Euro pushed below the 1.08 handle before finishing the week just above that level.
The union currency had bottomed out at the 1.07 level as medium term price action was always suggesting a return to or below that level but this reversal in price action momentum in the short term is likely to see the 1.09 level come under threat next:
The USDJPY pair put in roller coaster before the jobs print and was able to get back to its previous stuck highs just above the 151 level despite the lower USD as it again comes up against strong overhead weekly resistance (horizontal black line on chart below).
The medium term picture remains somewhat optimistic as Yen sold off due to BOJ meanderings but momentum is now trying to get out of oversold mode while ATR support remains firm but under pressure at the 151 handle proper:
The Australian dollar was one of the weaker undollars from Friday night, unable to continue its mid week bounce to consolidate just below the 66 handle but above short term support.
The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while the previous temporary surge looked strong, it wasn’t overbought on the four hourly chart and had not surpassed support from last week’s consolidation phase. While this looks good in the short term, longer term resistance is likely to kick in at the 66 cent handle:
Oil markets are pausing their breakouts following the attacks on Russian refineries with Brent crude steadying just below the $91USD per barrel level on Friday night, capping off a very strong week of gains.
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, although now well overextended. I expect a further pause or mild retracement in this trading week:
Gold just keeps climbing to new highs through any volatility, pushing aside the USD to burst through the $2300USD per ounce level, closing at $2329 on Friday night.
In the previous week daily momentum was nearly off the charts – never a good sign – with short term support at the $2100 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!