As the G7 meeting in Canada gets underway, the headlines are still dominated by the Israeli-Iranian war with the potential for a ceasefire pushing European and US stocks higher overnight. The USD was able to gain some lost ground but remained quite mixed against the currency majors with news of a potential trade deal with the UK not really moving Pound Sterling while only Yen and Euro pulling back. The Australian dollar spiked above the 65 cent level again showing further resilience while US Treasury yields continued to rise with not a lot of buying support in recent auctions sending longer dated yields higher.
Oil prices are cooling off slightly but remain elevated with Brent crude retracing back to the $72USD per barrel level while gold took a big hit after almost pushing to a new historic high to finish at the $3390USD per ounce level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets lifted slightly in the afternoon as the Shanghai Composite remains slightly below the 3400 point level while the Hang Seng Index slipped at first before rebounding at the close to finish 0.7% higher and get back above 24000 points.
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. Watch for any crack below the low moving average or 23000 point level that could halt this breakout:
Japanese stock markets pushed higher on BOJ speculation with the Nikkei 225 moving up more than 1% to 38311 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. Watch ATR support closely which appears to be firming in recent sessions:
Australian stocks were dead flat with the ASX200 about to close at 8548 points. SPI futures are flat given the rebound on Wall Street from overnight.
The daily chart pattern is still suggesting 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 now rolling over:
European markets found some positive momentum on the potential for a ceasefire in the Middle East with the Eurostoxx 50 Index gaining nearly 1% to close at 5339 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 is accelerating here so watch for support at the 5200 point level proper:
Wall Street also rebounded on the potential news with the NASDAQ closing more than 1.3% higher while the S&P500 gained nearly 1% to close at 6033 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 try to get back above the pre-Trump Tariff Tax day:
Currency markets remain in an anti-USD mood regardless of the safe haven trade with only a few undollars like gold and Euro pulling back overnight, the latter still finishing at the mid 1.15 handle after previously breaking through the 1.16 level.
The union currency had been building strength continuously as bad domestic economic news from the US overshadows\ed any continental slowdown with a swift rise above the 1.16 level on the latest weak PPI print and stronger jobless claims. Medium term momentum was very overbought before the Israeli strike so this reversal is not unexpected. Watch for internal support in the short term at the 1.15 level:
The USDJPY pair saw a small reversal on the safe haven mood but only just got above the 144 level as momentum remained neutral but some USD strength over a potential Iranian ceasefire and some speculation about what the BOJ will do today is sending it higher again.
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. I’m still watching short term support that could come under pressure here again:
The Australian dollar continues to show a lot of internal support on the short and medium term charts as it holds around the 65 cent level despite the first mild pullback following the Middle East turmoil as it actually made a new weekly high overnight.
Stepping back for a longer point of view (and looking at the trusty AUDNZD weekly cross) price action has remained supported by the 200 day MA (moving black line) after bouncing off a near new five year low. Keep an eye on temporary support at the 63 cent level but this is still looking promising for the Pacific Peso:
Oil markets are obviously highly volatile and will likely to continue to do so in coming sessions as even the sniff of a potential ceasefire saw Brent crude slump down to the $72USD per barrel level overnight.
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 previous lows is obviously off the table until the conflagration between Tel Aviv and Tehran subsides:
Gold was moving like the other undollars against USD after finding some stability last week but after recently managing to get over the $3400USD per ounce level it was swiftly bought back below that number overnight.
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. However it seems to want to climb above the recent weekly/monthly highs and still have another crack at the $3400 level as USD weakens:
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!