A mixed night of risk taking with European shares surging despite increased Middle East tension while Wall Street stumbled at the close with barely any gains. The USD remains relatively weak against the currency majors although Euro pulled back in later trade and Yen continues to weaken after its epic volatility recently. The Australian dollar tried to strengthened above the 66 cent level but pulled back following the RBA hold decision yesterday.
10 year Treasury yields moved lower again, this time just below the 4.5% 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 Chinese share markets saw a slight lift with the Shanghai Composite up 0.2% while the Hang Seng Index slid more than 0.6% to finish at 18463 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:
Meanwhile Japanese stock markets reopened from another long weekend with the Nikkei 225 jumping up 1.5% to close at 38835 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 support level to remain solid here:
Australian stocks loved the RBA hold and soared higher with the ASX200 closing 1.4% higher to 7793 points.
SPI futures are up just 0.2% due to the uneasiness 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 again all positive across the continent, making some solid gains as the Eurostoxx 50 Index finished 1.2% higher, closing at 5016 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 tried to continue the earnings optimism train but stumbled at the close with the NASDAQ pulling back slightly while the S&P500 lifted just 0.1%, closing at 5187 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 although Euro gave up some ground later in the session, receding from its prior topping action post 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 trying to climb back after its wild ride, this time returning to the mid 154 handle making a nice rebound from its 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 trailing ATR at the 155 handle next:
The Australian dollar was pushing ahead before the latest RBA meeting but failed to make any headway as the hold decision was already baked in, with the Pacific Peso unable to remain above the 66 cent handle overnight.
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.
Oil markets are barely holding on after a lot of intrasession volatility despite the latest round of Middle East conflicts with downside volatility pausing overnight as Brent crude remains just above the $83USD 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 last week.
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!