The trade war is over and everything will be awesome according to US officials in the Trump regime as the EU seemingly caved in on their respective trade “deal” aka framework, which has sent the USD higher while leaving European stocks adrift in a sea of trouble. Wall Street still pushed to new record highs – but only just – after being up significantly higher earlier in the session as traders weigh up a very busy week for macro events including the latest US jobs figures on Friday. Euro was sold off sharply to new weekly lows while the Australian dollar almost cracked through the 65 cent level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets have steadied going into the close with the Shanghai Composite just below 3600 points while the Hang Seng Index is up by nearly 0.5% to extend above the 25000 point level.
The daily chart shows a complete fill of the March/April selloff with momentum building again to make new highs. This is still looking like a strong bounceback with firm support at the 23000 point level as a springboard but some resistance is building here:
Japanese stock markets were the odds one out with the Nikkei 225 pushed 1% lower to be just above 41000 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 potentially have a pullback:
Australian stocks were able to take back some lost ground with the ASX200 closing 0.5% higher at 8697 points. SPI futures are down nearly 60 points despite the solid finish from Wall Street overnight.
The daily chart pattern is still suggesting further upside is still possible with a base being built here and although daily momentum has eased off from its slightly overbought status its still very positive:
European markets were unable to gain traction post the new trade “deal” with the US as most stocks closed lower across the continent sending the Eurostoxx 50 Index down nearly 0.3% to finish at 5337 points.
Weekly support hasn’t moved in a few months but it was never fully breached, giving time for the market to build a base and breakout here back to the pre “Liberation Day” highs. Watch for further retracement on any Trumpian volatility:
Wall Street again pushed to new record highs but only with meagre gains with the NASDAQ finishing 0.2% higher while the S&P500 only closed 1 point higher to 6389 points in a lacklustre session.
The four hourly chart was looking confused with recent support at the 6200 point level coming under pressure before resistance at the 6350 point level was taken out as more record highs are made as ATR support climbs and everything is awesome:
Currency markets are absorbing the latest framework of a trade deal, this time the big one with the EU which immediately sent USD higher against almost everything although this could be short lived as Friday’s jobs print looms. Euro had been well supported as it consolidated just below the 1.18 handle last week in wait but has been sharply sold off down to just below the 1.16 level.
The union currency had been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown but has reversed that trend in recent weeks. Short term momentum was suggesting a somewhat overbought stage that has now turned into a proper rout with a new weekly low so watch for potentially more damage from here:
The USDJPY pair faced a proper stall here before the Japanese election then sold off completely to get well below the 146 level but has snapped back on further USD strength almost getting back to its previous weekly high.
I think my contention of a completion of the multi year bearish head and shoulders setup by breaking below the 139 level is off the cards for now, but the inevitable pullback on too much strength and of the course the TACO trade is building risk against the pair:
The Australian dollar recently took a big hit on the weaker unemployment print, although it managed to claw back most of that later last week it was still stuck around the 65 handle again as too many domestic and USD factors keep the Pacific Peso on a downtrend. Its all too much now with a reversal that threatens to return to new weekly lows on more USD strength.
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, but this is looking better:
Oil markets are still struggling to make significant gains with the trend still sideways at best as Brent crude finished just above the $69USD per barrel level yet again.
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 still there if it cannot make a substantive new daily high.
Gold made a surge play at the start of last week, flying right up through the $3400USD per ounce level, but this proved to be a false break as it plummeted in subsequent sessions, finishing below the $3340 level on Friday night and then again testing the $3300 level overnight.
Short term support has been under threat most of the last three weeks with price almost returning to the late June lows as the USD gains strength. Daily momentum is quite negative now with short term momentum very oversold:
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!