The USD rebounded on more hawkish Fedspeak overnight, with Wall Street still unable to put runs on the board as inflation concerns linger. European stocks moved higher on more dovish speak from the ECB which will give Asian stock markets mixed signals on the open this morning. The Australian dollar retraced back to the 64 cent level on the stronger USD as a result.
10 year Treasury yields were up slightly to almost get back to the 4.7% level, while oil prices continued to fall after moving out of their recent range bound condition as Brent crude dropped below the $87USD per barrel level. Meanwhile gold was unable to clawback all of its recent setback, settling again just below the $2380USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets are moving in the same direction with the Shanghai Composite lifting nearly 0.2% while the Hang Seng Index is putting in a better response, up nearly 1% to 16428 points.
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 at the 16400 point area is the area to watch next to come under threat:
Japanese stock markets saw a mild rebound with the Nikkei 225 up more than 0.5% at 38150 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 as futures show a further breakdown:
Australian stocks had the worst rebound with the ASX200 finishing just 0.4% higher at 7639 points.
SPI futures are down at least 0.7% due to the wobbles 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. ATR daily support has now been broken, which is significant, taking price action back to the February support levels, although momentum is not yet oversold:
European markets were able to stabilise and then rebound with some solid sessions across the continent as the Eurostoxx 50 Index finished nearly 0.5% higher at 4936 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout but this retracement below short term support could turn into a larger reversal with futures showing a clear break of support at the 4900 point level next:
Wall Street still can’t find a bid with all but the headline Dow falling back with the NASDAQ off by 0.5% while the S&P500 finished 0.2% lower to almost retrace below the 5000 point level, closing at 5011 points.
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, this break below the 5240 point area has setup for further downside. Watch firm support at 5000 points as a possible pausing point here:
Currency markets were already in the thrall of King Dollar on the back of the US CPI print before this macro volatility with safe haven buying in USD coming back after a mild pause with Euro unable to get back above the 1.07 handle overnight.
The union currency had previously bottomed out at the 1.07 level at the start of April as medium term price action with a reprieving reversal in price action back towards the 1.09 level before last week’s inflation print. Short term support at the 1.0740 has been rejected so watch that level closely:
The USDJPY pair has been piling on breakout after breakout, managing to push aside the 154 handle at the start of the week but after a mid week stall it rebounded slightly overnight.
The medium term picture was always somewhat optimistic as Yen sold off due to BOJ meanderings but momentum had been building before the CPI print, positive for all of the last week at least with ATR support upgraded throughout. This is likely overcooked in the short term but sets up for potential gains from here:
The Australian dollar remains below recent weekly support with just a small lift above the 64 handle as risk unwinds from the commodity currency as it turned over again last night.
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. Watch for further downside below here as momentum remains oversold:
Oil markets are now retracing after topping out during the latest round of Middle East conflicts with volatility now to the downside as Brent crude retraced below the $87USD per barrel level overnight.
After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings.
Gold continues to defend its large uptrend after a minor retracement back to the $2300USD per ounce level but is failing to make any moves above the $2380 level since the start of the week.
In the previous week momentum was nearly off the charts – never a good sign – with short term support at the $2200 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!