Wall Street extended its gains from last week’s rebound with optimism across risk markets returning although macro events in the Middle East and some regions on holiday (UK and Japan) could prove unsettling. Nevertheless the USD remains relatively weak against the currency majors like Euro although Yen remains volatile post the BOJ interventions while the Australian dollar has strengthened above the 66 cent level, almost making a new monthly high as traders await today’s RBA meeting.
10 year Treasury yields moved lower again, this time just below the 4.6% level, while oil prices tried to stabilise as Brent crude remains at the $83USD per barrel level. Meanwhile gold has been unable to capitalise on its recent rebound as it struggles to maintain above the $2300USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets saw good rebounds with the Shanghai Composite up more than 1% while the Hang Seng gained more than 0.5% to close at 18578 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. Price action looks way overextended without any retracement to take heat out of the market, but futures look very optimistic indeed:
Japanese stock markets were closed for yet another holiday with Nikkei 225 futures looking optimistic on the re-open given the rally on Wall Street.
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 support level to remain solid here:
Australian stocks put in a very solid performance with the ASX200 closing 0.7% higher at 7682 points.
SPI futures are up a further 0.5% on the rally on Wall Street overnight. The daily chart was showing a potential bearish head and shoulders pattern forming with ATR daily support tentatively broken, taking price action back to the February support levels. Momentum is finally getting out of its oversold condition with this breakout setting up for potential upside:
European markets were all positive across the continent to finally get some stability as the Eurostoxx 50 Index finished 0.7% higher, closing at 4956 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 is unlikely to turn into a larger reversal unless support at the 4900 point level is breached again:
Wall Street continued the earnings optimism train with the NASDAQ gaining more than 1.2% while the S&P500 lifted 1%, closing at 5180 points.
The four hourly chart was showing a fairly wide trend channel forming after bottoming out at support at 5000 points but lost significant momentum following Friday’s rebound, and thus a full retracement through trailing ATR support at the 5100 point level. However, this has been staunchly defended and used as a springboard to beat the former weekly highs above the 5100 area with momentum nicely overbought:
Currency markets in the main remained resilient against USD overnight with Euro remaining well above the top range it was in prior to the FOMC meeting last week, settling just above the mid 1.07 handle this morning.
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 to medium term support at the 1.0630 level has been respected so far:
The USDJPY pair is still having a wild ride, this time rebounding to the upside with a return back above the 153 handle after making a new weekly low on Friday night.
This is not looking good in the short term for a lot of traders but looking through the volatility I thought we’d see some stability return around the 155 handle but not yet – watch for a potential breakout above the recent session highs at the 154 level on the return of Japanese traders today:
The Australian dollar is still pushing ahead as the RBA gets ready for its meeting today, with the Pacific Peso able to remain above the 66 cent handle, matching its previous monthly high.
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. With short term support respected here the breakout above the 66 level is all dependent on today’s meeting at Martin Place:
Oil markets have seen increasing intrasession volatility after topping out during the latest round of Middle East conflicts with downside volatility pausing overnight as Brent crude remains just below the $84USD per barrel level.
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 which is now broken:
Gold failed to get back on trend after the minor retracement earlier in the month with what looked like a complete rollover down through the $2300 level and is still depressed here at just above that level last night despite a modest rebound.
Notably however that is not enough to get over shorter term ATR resistance or indeed the late April highs at the $2350 level with momentum marginally neutral here:
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!