Overnight saw Wall Street react negatively to the Trump Tariff Tirade via letters to all the countries the regime has not yet done a trade deal (read: all but 3) with a surprisingly high number chosen for most and with threats of retaliation if any country decided to match or even attempt to put in some sort of reciprocal action.
So there goes global trade and indeed any attempt at reducing pressure on China as the tariffs are going to hurt Korea and Japan the hardest. Bonds sold off naturally while the USD lifted against almost everything except gold as the Australian dollar was pushed down in anticipation of today’s expected cut from the RBA.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were down slightly initially but the Shanghai Composite was able to push slightly higher above the 3400 point level while the Hang Seng was off by more than 0.5% at one stage before pulling out a scratch session to settle just below the 24000 point level.
The daily chart shows a near complete fill of the March/April selloff although momentum has now reversed after being slightly overbought as price action meets trailing support at the 23000 point level. This was looking like a strong bounceback with firm support at the 23000 point level as a springboard but resistance is building into a rollover here:
Meanwhile Japanese stock markets were also suffering a similar fate as the Nikkei 225 tracked back below the 40000 point barrier, falling 0.5% to close at 39587 points.
Daily price action was looking very keen indeed as daily momentum has accelerated after clearing resistance at the 36000 point level with another equity market that looks very stretched and breaking out a bit too strongly here. Watch ATR support continue to ratchet up but also for this rally to have a pullback:
Australian stocks were again just treading water with the ASX200 likely to close slightly lower at 8589 points. SPI futures are off by nearly 0.6% given the falls on Wall Street 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 has eased off from its slightly overbought status but still very positive:
European markets rebounded across the continent at first with the Eurostoxx 50 Index closing nearly 1% higher at 5341 points before giving up most of those gains in post close futures.
Weekly support hasn’t moved in a few months now indicating a lack of upward momentum with a potential rollover accelerating as daily momentum remains oversold. The market has not broken below the 5200 point level proper so we could see a small rally from here back to the previous highs but the tariff deadline is not helping confidence:
Wall Street reopened after the 4th of July long weekend but not with a lot of confidence as the NASDAQ closed some 0.9% lower while the S&P500 stumbled 0.8% lower on the Trump Tariff Tirade, finishing at 6229 points.
A big beautiful bounceback was seeing the 6000 point level brushed aside as everyone bought everything as the asset owners all got their tax cuts entrenched forever and a day. However the market is having a harder time swallowing the non existent tariff deal extravaganza so it looks like another manufactured dip here is underway:
Currency markets had been selling off King Dollar given the weakening domestic situation in the US but have now reversed into strength as the tariff deadline comes to pass with Euro hit back down to the 1.17 level proper overnight alongside a slew of other undollars.
The union currency has been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown. Medium term and short term momentum was in its favour but this is turning into a proper reversal so watch support at the 1.1650 mid level next:
The USDJPY pair had been in the doldrums below the 144 level with momentum waning to the downside but the NFP shoved some life into it before last night’s tariff deliverance as it shot up through the 146 handle before stabilising 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. However we could see this one off reaction to the NFP and tariffs push into a false rally up to the 148 level just as we did in June, so watch out for TACO:
The Australian dollar was relatively strong after pushing aside significant resistance at the 65 handle but it slid back to just below that level on last week’s NFP print and is now struggling to hold here amid the tariff chaos as we go into today’s RBA meeting.
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 and also the series of lower highs in recent weeks of signs of less internal support:
Oil markets have seen a small bounce on the unexpected spike of OPEC+ production with Brent crude finally breached the $69USD 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 building further:
Gold was playing catchup to other undollars as it tries to get back above the $3400USD per ounce level, however it retracing down to $3300 after the weekend trap before bouncing back up to the $3330 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. The desire to climb back above the recent weekly/monthly highs and still have another crack at the $3400 level is almost gone:
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!