Yet another quiet night in dataflow and macro events which gave Wall Street the mid week wobbles as both European and US stocks retreated slightly despite a solid session here in Asia. Currency markets again saw Euro to the fore as it breached the 1.11 handle while Yen is still hardening alongside the Australian dollar which continues to do well despite the rout in iron ore prices as it lifts above the 67 cent level.
10 year Treasury yields pulled back again, down 5 points to just above the 3.8% level while oil prices remained down with Brent crude still at the $77USD per barrel level. Gold was able to hold above the $2500USD per ounce level for a slight gain.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets slumped again after recently finding traction with the Shanghai Composite down nearly 1% while the Hang Seng Index was also down closing about 0.3% lower at 17480 points.
The Hang Seng Index daily chart was starting to look more optimistic a few months back but price action has slid down from the 19000 point level and continues to deflate in a series of steps as the Chinese economy slows. A few false breakouts have all reversed course and another downside move was looming here but this breakout has some potential as it clears short term resistance:
Meanwhile Japanese stock markets are getting hectic again on Yen volatility with the Nikkei 225 closing nearly 1.8% higher to 38062 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 support subsequently broke on that retracement, and then the front fell off. We are now seeing a big fill here but Yen volatility is coming back so a return to the 38000 point level from May/June is still possible but could be a rough road:
Australian stocks eked out another small gain with the ASX200 lifting just 0.2% to almost close above the 8000 point level.
SPI futures however are down nearly 0.5% or due to the lack of direction on Wall Street overnight. Former medium term support at the 7700 point level will remain under pressure here as trader’s absorb the RBA’s signalling of no punchbowl for the rest of 2024, but short term momentum is starting to rollover here:
European markets tried to stabilised further but were unable to put in further gains with some pullbacks across the continent as the Eurostoxx 50 Index finished nearly 0.3% lower at 4854 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 with support at the 4900 point level quite firm with resistance just unable to breach the 5000 point barrier. Instead, former ATR support at the 4900 point level was only a temporary anchor point as we remain deep down into correction territory. Price has cleared the 4700 local resistance level to get out of trouble:
Wall Street was down across the board as it was unable to follow through from its start of week performance with the NASDAQ losing 0.3% while the S&P500 closed some 0.2% lower to 5597 points.
The four hourly chart illustrates how this bounceback has now cleared short term resistance at the mid 5300 point level with momentum retracing fully from oversold to very positive. The potential for a positive breakout is still building here as it tries to return to the early August highs but watch ATR support closely:
Currency markets continued to move further against USD in the wake of last week’s US CPI print with more weakness overnight. Euro took even more advantage and continued its spike up through the 1.10 handle from Friday night and made further gains to breach the 1.11 level.
The union currency had previously bottomed out at the 1.07 level before gapping higher earlier in the week with more momentum building to the upside with the 1.0750 mid level as support but there was still too much pressure from King Dollar. This looks much more encouraging but very overbought in the short term:
The USDJPY is trying to get out of its downwards medium term pattern as the carry trade unwinds but is failing here as it retraces sharply below short term support at the 147 level to almost reach the 145 handle.
The overall volatility speaks volumes as it pushed aside the 158 level as longer term resistance in the weeks leading up to the BOJ rate hike. Momentum is suggesting a possible bottom is brewing as the BOJ wants to get this under control:
The Australian dollar is pushing higher on the weaker USD and the recent soft unemployment print with the breakout from Friday night continuing now well above the 67 handle.
During June the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone but that has changed in recent weeks with price action finally getting out of the mid 66 cent level that acted as a point of control. This level will now switch to support so watch for any retracements as buying opportunities:
Oil markets are failing to move out of their previously weak position as downside volatility builds again with Brent crude slammed back down to the $77USD per barrel level again overnight.
After breaking out above the $83 level last month, price action had stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Daily ATR support had been broken with short term momentum still in oversold mode as this swings into higher volatility:
Gold has kept above the $2500USD per ounce level from the weekend gap and is slowly building more short term momentum as USD weakens.
The longer term support at the $2300 level remains firm while short term resistance at the $2470 level was the target to get through last week as I indicated. This is still looking a little overextended so I expect a minor pullback unless USD weakness continues tonight:
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!