Risk markets didn’t pivot as much as expected on the outcome of the death of the Iranian President with no other macro catalysts from economic releases or important speeches. While oil prices were a little more volatile, Wall Street continued to lift somewhat as European stocks were also relatively quiet but positive. The USD remains relatively weak although Euro pulled back later in the session while the Australian dollar was unable to start the trading week above the 67 cent level, suffering a small retracement.
10 year Treasury yields were able to rebound slightly further above the 4.4% level while oil prices initially firmed but then lost ground later in the session with Brent crude remaining just below the $84USD per barrel level. Gold tried to continue its rocket move higher above the $2400USD per ounce level but lost some momentum later in the session.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets have held on to their initial gains going into the close with the Shanghai Composite up 0.5% while the Hang Seng Index is up about the same to 19641 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 this looks very optimistic indeed:
Meanwhile Japanese stock markets are doing even better with the Nikkei 225 up 0.6% to 39035 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 had been defended with short term price action now rebounding off former support at the 39000 point level with short term momentum now indicating a breakout:
Australian stocks are doing well in line with the rest of the region with the ASX200 up 0.5% to 7862 points.
SPI futures however are down slightly despite the fairly mixed returns 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 able to start the week with green across the continent but it wasn’t a very convincing session, as the Eurostoxx 50 Index closed just 0.2% higher at 5074 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 is still looking to turn into a larger breakout with support at the 4900 point level quite firm but that bearish engulfing one day candle is holding back the gains:
While the Dow retraced from its new record high, the broader indicies were able to put in some modest returns with the NASDAQ leading the way, up 0.6% while the S&P500 pushed just 0.1% higher finishing at 5308 points.
The four hourly chart is now showing a large move higher as all Fed roadblocks seem cleared with price action getting well out of its previous slightly stalled position above the 5200 point area with momentum retracing out of its overbought status but looking somewhat flat here:
Currency markets remain in an anti USD mood following last week’s softer than expected US CPI print with the majors pushing a little higher on Friday night after being overextended in the previous session with Euro steadying just below the 1.09 handle as a result.
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 its own inflation print. Short to medium term support at the 1.0630 level has been respected and upgraded now with this breakout supported by extended momentum settings:
The USDJPY pair continues to slowly move higher again after being one of the biggest movers during last week following the US CPI print, rounding off and finishing just above the 156 handle overnight.
This price action post the epic BOJ meeting volatility was much more welcome but this reversal is not that surprising given the weakness of the USD. ATR resistance at the mid 155 handle will play a role this trading week as an anchor point:
The Australian dollar got a great kick upwards on the weaker than expected US CPI move, having pushed through the 67 cent level last week but can’t seem to make this stick with another failed breakout to start the week and return below that level this morning.
The Aussie has been under medium and long term pressure for sometime before the recent 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. This tentatively looks good for the Pacific Peso but momentum is not overbought again:
Oil markets are just holding on as intrasession volatility lifts again on the Iranian question as Brent crude initially firmed to lift above the $84USD per barrel level yet but retraced below this morning.
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 support here at the $86 level which is still broken and will likely be resistance for sometime:
Gold finished its retracement earlier in last week and then rebounded to a new monthly high on the weaker USD, shooting out of the gates over the weekend well above the $2400USD per ounce level but is shaking out this too much volatility overnight, settling at the $2424 level.
Short term momentum was in extreme overbought mode so I was always wary that this move will stick , so watch if price action will be supported here at trailing short term ATR support at the obvious $2400 level:
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!