Risk markets were relatively sanguine overnight as the Trump regime’s new “Tax” Deal (aka blowing out the deficit forever) passed while the latest flash PMIs suggested a slight uptick in confidence in the US despite the tariff chaos in the last month. Wall Street was up at one stage but managed to give back almost all those gains at the close with European stocks selling off mildly, which should lead to a mixed finish here in Asia.
The USD came back slightly against most of the majors although the Canadian Loonie held, Treasuries rallying after selling off most of the week with 10 year yields settling at the 4.5% level although the 30 year remains stubbornly over 5% at yearly highs.
Oil prices remain somewhat weak with Brent crude pushed below the $64USD per barrel level while gold also suffered a little setback to cross back below the $3300USD per ounce level overnight.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets slid back in the afternoon session with the Shanghai Composite down 0.2% while the Hang Seng Index has lost over 1% as it fails to push back above the 24000 point level.
The daily chart shows a near complete fill of the March/April selloff although momentum is now picking up again and remains slightly overbought as the 90 day “relief” continues without any further positive news:
Japanese stock markets also saw similar losses on the strengthening Yen however with the Nikkei 225 down more than 0.8% to 36958 points.
Daily price action was looking very keen indeed although daily momentum has slowed down somewhat this week after clearing resistance at the 36000 point level with another equity market that looks stretched and ready to rollover again here:
Australian stocks were the best of a bad bunch with the ASX200 losing only 0.4% at 8350 points.
SPI futures are up around 0.2% on the uneasy finish on Wall Street overnight. The daily chart pattern suggests further upside is still possible as the inverted head and shoulders pattern is nearly complete with the RBA cut helping boost this but correlation with other risk markets will come into play here – watch as daily momentum is slowly rolling over:
European markets had mild selloffs across the continent almost in unison with the Eurostoxx 50 Index finishing 0.5% lower at 5424 points.
Support at the previous monthly support levels (black line) at 5100 points is now firmly held with the bounce off the 2024 lows at the 4400 point level indicating a massive fill of this dump and pump action with the former February highs nearly complete. A rollover maybe forming here so watch for support at the 5400 point level proper:
Wall Street was up for most of the session but gave back most of its gains with the NASDAQ up only 0.2% while the S&P500 put in a scratch session to close at 5842 points.
The four hourly chart was previously supporting a potential slowdown action here that could be translating to a top on the daily chart as prices gets back above the pre-Trump Tariff Tax day. But the rollover here will catch up to economic reality as earnings multiples retract as the US economy shrinks even further due to the new “Big Beautiful Tax Bill”:
Currency markets are seeing a minor retracement towards USD strength overnight despite the ructions on bond markets with Euro pushed back below the 1.13 handle, with Pound Sterling also taking a little cream off the top in a correlated move against most of the majors.
The union currency was pushed back below the 1.13 handle last week as support bounced back to the 1.12 level which corresponds to the 2023 and 2024 highs but a potential breakout above trailing ATR resistance here on the four hourly chart is brewing although momentum has definitely retraced from overbought status for now:
The USDJPY pair retraced all week to be pushed back below to the 144 handle as the ructions around the Japanese sovereign bond market continued to widen but found a little bit of life overnight to just get back above that level late this morning.
I still contend we need to watch for any sustained break below the 139 level which completes a multi year bearish head and shoulders setup that could see the 110 to 120 level revisited. No trade deal is on the horizon either with the 10% baseline still holding:
The Australian dollar was oscillating around the 64 cent handle against USD with the latest RBA rate cut absorbed and then some but after coming up against short term resistance has been pushed back to the 64 cent level proper overnight.
Stepping back for a longer point of view (and looking at the trusty AUDNZD weekly cross) price action has crossed back above the 200 day MA (moving black line) after bouncing off a near new five year low. This is all about the USD, not the Australian economy – or is it? – so I’m wary here but you’ve got to follow price, keeping an eye on temporary support at the 63 cent level:
Oil markets are failing to hold onto its post tariff bounce and continue to face other geopolitical ructions and OPEC pushing supply with Brent crude pushed back down to almost below the $64USD per barrel level again after failing to make a new weekly high.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways lower action for the latter half of 2024. The potential for a return to the 2024 lows is still building here as domestic demand in the US is likely to continue to decline as the Trump Taxes take effect:
Gold pulled back overnight after a series of moves higher this week to make a very solid effort to get back on track back with a small move back below the $3300USD per ounce level.
Short term support had firmed immensely in recent sessions showing real strength but momentum became considerably overbought so this was inevitable as price action has reverted back to the uptrend line from the April lows. There is further support at the $3200 level that could be tested next on the overshoot:
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!