Another mixed night of risk taking with European shares still lifting while Wall Street is struggling to put on gains as concerns about the trajectory of the Fed overshadow the complex. The USD is now starting to firm against the currency majors with Euro pulling back further alongside Yen with the Australian dollar also failing to get back above the 66 cent level following the recent RBA hold decision.
10 year Treasury yields moved lower again, this time just below the 4.5% level, while oil prices tried hard 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 fall with the Shanghai Composite down 0.6% while the Hang Seng Index also took a small tumble, losing more than 0.8% to finish at 18313 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 were the biggest losers with the Nikkei 225 taking back its previous gains, closing more than 1.5% lower at 38602 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 were the odds one out and held on to their post RBA meeting gains with the ASX200 closing 0.1% higher to cross the 7800 point barrier.
SPI futures are down 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, but the returns were more modest as the Eurostoxx 50 Index finished just 0.4% higher, closing at 5038 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 can’t seem to find its mojo with another stagnant session as the NASDAQ pulled back slightly while the S&P500 finished dead flat, 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. Price action is stalled at the 5200 point area with momentum now retracing out of overbought settings:
Currency markets are starting to falter as USD begins to firm against the complex as Euro gave up further ground throughout, receding from its prior topping action post the FOMC meeting last week, settling just below 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, but watch for a break below the recent session lows:
The USDJPY pair is climbing back higher after its wild ride, last night time returning to just below the mid 155 handle, now 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 again pulled down below 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. I’m watching the next few sessions closely for signs of a further breakdown as the Budget is absorbed:
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 is still failing 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 remains depressed here at just above that level.
Notably however the recent rebound 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!