Geopolitics again dominated the newsflow overnight, although the latest Canadian CPI print gave off a bit of a reverberation across currency markets with the USD pushing most of the majors down slightly as the Loonie almost went back to its recent monthly low. European stocks rallied while Wall Street pulled back on mixed home sales data and tariff concerns. Most risk markets are waiting for the Jackson Hole conference later in the week with oil prices remaining stagnant while the Australian dollar tried hard to hold on has now slumped back down to the low 64 cent level against USD.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were flat into the close with the Shanghai Composite to stay just above the 3700 point level while the Hang Seng Index is down 0.2% to stay slightly above the 25000 point level.
The daily chart shows a complete fill of the March/April selloff with momentum reversing after failing to make new highs. Resistance at the 25000 point level has turned into a breakout play here with support at the 24000 point level as the springboard:
Japanese stock markets were also treading water before selling off at the close with the Nikkei 225 down 0.4% to 43546 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. ATR support has been ratcheting up for awhile but is not stopping:
Australian stocks were the worst in the region with the ASX200 losing 0.7% to close at 8896 points. SPI futures are steady but the very poor lead from Wall Street overnight could see extended volatility today.
The daily chart pattern is suggesting further upside still possible with a base built above the 8500 point level as daily momentum has regained its overbought status:
European markets rebounded across the continent with the Eurostoxx 50 Index closing 0.8% higher to finish at 5484 points.
Weekly support hadn’t moved in a few months but has now been decisively breached, with the market unable to push any further above the pre “Liberation Day” highs. There could be daylight below but momentum was quite oversold so this might be overdone as this rebound shows a complete fill:
Wall Street however was unable to translate the positive mood into new record highs again with the NASDAQ slumping more than 1.4% lower while the S&P500 finished 0.6% lower at 6411 points.
The daily chart still looks like a stairway to heaven while the four hourly chart shows the 6500 point barrier becoming a little too higher to overcome as short term momentum switches to oversold mode:
Currency markets have been against USD last week following a succession of poor US domestic economic prints with the latest inflation prints actually absorbed by the majors as “King Dollar” wasn’t able to regain strength. This week is seeing a slight change in tune as we await the Jackson Hole conference on Friday with more hawkish Fedspeak pushing the majors back as Euro was pushed slightly lower overnight to just below the mid 1.16 level.
The union currency had been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown but had reversed that trend in recent weeks. Short term momentum was suggesting a proper rout with a new weekly low at the 1.14 handle but this is a strong reversal that may have more upside:
The USDJPY pair had been getting pushed down on temporary Yen weakness following the Japan/US trade “deal” and USD weakness around the CPI print, but held steady somewhat overnight to head back towards but not above the 148 level.
The previous price action was sending the pair beyond the March highs and had the potential to extend those gains through to start of year position at the 158 handle but the jobs surprise puts this all on the backburner. There could be another attempt here to get back to the 150 handle in the short term however:
The Australian dollar has been largely unchanged by the recent but well expected RBA cut where it held above the 65 handle but overnight saw confidence disappear in full with a significant fall down to the mid 64 cent level after making a new series of lows on the four hourly chart.
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, as there is potential for a further rollover if Fed signalling does not become more dovish, with weekly support now taken out.
Oil markets still really can’t get any positive momentum going as Brent crude remains stuck around the $66USD per barrel level after recently making new weekly lows.
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 was gaining traction but needs a lot more support in the short term:
Gold had been failing to revive its recent bounceback as it flopped down towards the $3300USD per ounce level overnight after making a series of new lows on the four hourly chart.
Short term support had been under threat most of the last three weeks with price almost returning to the late June lows as the USD gained strength. Daily momentum was getting back into the positive zone, as support was being somewhat built but that series of new lows was too telling:
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!