Wall Street rebounded on Friday night as European stocks also lifted as the latest US core PCE (personal consumption expenditure) figures came in cooler than expected, driving expectations of a sooner rate cut rather than later from the Fed. The USD firmed against most of the majors although Yen was sold off to new multi year lows on the BOJ meeting outcome from Friday, while the Australian dollar remained firm above the 65 cent level without any significant upside.
10 year Treasury yields slipped following the report, settling at the 4.6% level, while oil prices also gained with Brent crude lifting above the $88USD per barrel level on a strong bid. Meanwhile gold was unable to make any great strides, still struggling from last week’s setback to remain stuck at the $2330USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland and offshore Chinese share markets are heading in the same direction with the Shanghai Composite up more than 1% to get back above the 3100 point level while the Hang Seng Index has soared over 2% higher to 17650 points, finishing its strong performance this week.
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 so far at the monthly resistance levels, although support at the 16400 point area is the area to watch next as price bounces off:
Japanese stock markets are doing better after the BOJ meeting with the Nikkei 225 up nearly 0.9% to 37934 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 although futures are looking quite mixed:
Australian stocks were the odd ones out with a down session due to the BHP decision with the ASX200 finishing more than 1.3% lower at 7575 points.
SPI futures however are up at least 0.3% as they try to catch up to the very high optimism on Wall Street. 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 failing to get out of its oversold condition:
European markets were able to continue their own rebound with some solid sessions across the continent on Friday night as the Eurostoxx 50 Index finished 1% higher to get back above the 5000 point barrier.
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 a clear break of support at the 4900 point level that is trying to be filled here:
Wall Street has had a wild ride following a series of economic and earnings events but capped it off with a big surge on Friday night with the NASDAQ up more than 2% while the S&P500 finished 1% higher, closing at 5099 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. Firm support at 5000 points had turned into a proper pause here with a breakout above four hourly ATR resistance at the 5100 point level indicating a bottom maybe finally formed:
Currency markets have been slowing turning away from King Dollar and had a mild reversal on the GDP and PCE double whammy before getting back on track with Euro holding above the 1.07 handle overnight, nearly completing a rounding bottom pattern on the four hourly chart below.
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, but this time it went to the moon following the BOJ meeting! A near 300 pip straight rocket ride through the 158 handle as Yen is sold off appreciably.
The medium term picture was always somewhat optimistic as Yen sold off due to previous BOJ meanderings but momentum had been building before the meeting, remaining well overcooked. This is now literally off the charts and should result in a pullback, but would you short this anytime soon?
The Australian dollar remains above the 65 handle with another small breakout on Friday night as it extends its two week high without getting ahead of itself.
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 as this rounding bottom pattern is now complete as momentum builds:
Oil markets has seen increasing intrasession volatility after topping out during the latest round of Middle East conflicts with moves to the downside thwarted as Brent crude lifted above the $88USD per barrel level in a much stronger effort last week.
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. Watch daily ATR here carefully:
Gold is still trying to get back on trend after the minor retracement back earlier in the month with the failed breakout above the $2400USD per ounce level turning into a correction as it remained stuck at the $2330 level on Friday night.
Support at the $2200 level is still a long way off here as shorter term support at the $2330 area needs to be defended first or the early April gains will also disappear promptly:
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!