Risk markets loved Fed Chair Powell’s long awaited speech at the central back fest at Jackson Hole with a dovish tilt seemingly suggesting that the Federal Reserve will cut rates in September, but only if inflation remains contained from the Trump regime’s tariffs. The hint gave Wall Street the signal to buy after five straight sessions of selling and also sent the USD down against, well everything as currency markets surged against “King” dollar. Euro was pushed nearly 100 pips higher to a three week high while Treasury yields pulled back sharply. The Australian dollar also took back all its lost ground and then some after its recent falls, almost heading back to the 65 cent level proper.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets surged nearly 1.5% with the Shanghai Composite pushing through the 3800 point level while the Hang Seng Index was up nearly 1% as it bounces off 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 mixed with the Nikkei 225 up by just 0.1% to finish the week at 42633 points although futures are suggesting a rise on the open.
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 again the odd ones out in the region but this time to the downside on profit taking with the ASX200 closing some 0.6% lower to retrace back below the 9000 point level. SPI futures however are up nearly 1% on the very solid lead from Wall Street on Friday night so its off to the races!
The daily chart pattern is suggesting further upside still possible with a base built above the 8500 point level as daily momentum has maintained its overbought status:
European markets were able to fill in their recent pullbacks with some modest gains across the continent with the Eurostoxx 50 Index closing 0.5% higher to finish at 5488 points.
Weekly support has been respected after a brief touch below the 5200 point level as the recent rebound on Euro weakness shows a complete fill. However this market is still tracking sideways and may face pressure if Wall Street stumbles next:
Wall Street got the green light – though it was hazy at best if you read between the lines of what Fed Chair Powell actually said – with the NASDAQ finishing nearly 2% higher while the S&P500 gained nearly 1.5% to close at 6466 points, taking it back to its previous high.
The daily chart still looks like a stairway to heaven while the four hourly chart shows the 6500 point barrier becoming a little too high to overcome as short term momentum switches to oversold mode. Watch for a resolution at support here:
Currency markets had been swinging the USD way all last week as traders were rebalancing in wait for the Jackson Hole conference but this has caused a massive swing against “King” dollar with Euro leading the way on Fed Chair Powell’s comments, lifting a proper 100 pips almost instantly to return above the 1.17 level on Friday night. This was replicated nearly across the board with Pound Sterling, Loonie and Yen all moving higher.
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, having lost more than 100 pips since the start of the trading week, but weekly support held fire before the Friday night reversal:
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 was getting more lively here with a breakout above the 148 handle before the Friday night purge where it subsequently went through two handles!
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. USD weakness is going to weigh on Yen for awhile here so watch for a potential breakdown to the 146 handle next:
The Australian dollar has been largely unchanged by the recent but well expected RBA cut where it held above the 65 handle but confidence weakened as it fell back down to the 64 cent level to retrace back to its July lows in an obvious pre-positioning before the Jackson Hole speech. The immediate reaction saw the Pacific Peso lift straight up to the 65 cent level but has not yet breached it.
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 still under a lot of pressure:
Oil markets are trying hard to get any positive momentum going as Brent crude lifted again on Friday night to extend further above the $67USD per barrel level after being stuck around the $66USD area 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 but it too had a great reversal on Friday night on the so-called dovish Fed, with a strong move up towards the $3370 level.
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!