Sticky tariff induced inflation in the US overnight sent Wall Street lower as the expectation of rate cuts were diced as the latest PCE came in higher than expected. The Trump regime continues to bully Canada with the probability of 35% tariffs rising as no deal or framework before the August 1st “deadline” while Mexico just scraped in. The USD held ground against the majors with the Australian dollar pushed down to the 64 cent level while US Treasuries all saw increases in yields with expectation of a September cut falling further.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were down sharply going into the close with the Shanghai Composite losing more than 1% to retrace back below the 3600 point level while the Hang Seng Index lost more than 1.5% to retreat below the 25000 point level.
The daily chart shows a complete fill of the March/April selloff with momentum building again to make new highs. Resistance at the 25000 point level is turning into a possible reversal here:
Japanese stock markets were the odd ones out with the Nikkei 225 pushed more than 1% higher as it closes at 41100 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 unable to climb due to domestic releases with the ASX200 closing nearly 0.2% lower to remain above the 8700 point level. SPI futures are down nearly 0.8% due to the slump on 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 sold off into the August 1st deadline with most bourses lower across the continent sending the Eurostoxx 50 Index down more than 1% to finish at 5319 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 failed to gain traction with the NASDAQ dead flat while the S&P500 was pushed 0.4% lower to close at 6339 points.
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. However ATR support has broken here taking out last week’s gains so watch for a potential follow through to the 6300 point level proper:
Currency markets are pushing USD higher in the wake of the Federal Reserve meeting and the latest PCE inflation numbers sending most currency pairs sharply lower again overnight. Euro was one of the most affected after breaking through the 1.15 handle in the previous session, it again almost broke through the 1.14 level this morning but found some support.
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 has pushed significantly higher on USD strength to extend well above the 150 level to make a new monthly high.
This price action is sending the pair beyond the March highs and has the potential to extend those gains through to start of year position at the 158 handle:
The Australian dollar recently took a big hit on the weaker unemployment print and has struggled to not make new weekly lows on more USD strength, but has now broken well below the 65 cent level as a RBA cut looms and the Fed likely to hold in September.
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 not looking better:
Oil markets are seeing a follow through of the previous session breakout with Brent crude nearly finishing above the $72USD per barrel level to hold on to its new monthly 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 rally up to the $80 level after making new substantive daily highs is now gaining traction:
Gold made a false break above the $3400 level recently but plummeted in subsequent sessions, finishing below the $3340 level on Friday night but has since pushed right through the $3300 level on USD strength.
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!