Risk markets continue to have second thoughts about the dovish mood at the Federal Reserve with the added volatility around the Trump regime looking to takeover the Fed’s independence itself not helping the USD. Although Euro is seeing some kickback due to French political problems, Yen, Pound Sterling and the Australian dollar are all heading higher with the latter holding its position just under the 65 cent level proper. Wall Street saw a small lift on a solid consumer confidence print while European stocks pulled further back as Treasury yield curve steepened yet again.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets fell back going into the close with the Shanghai Composite losing nearly 0.4% but staying above the 3800 point level while the Hang Seng Index was down 1.2% to close at 25524 points.
The daily chart shows a complete fill of the March/April selloff with momentum reversing back into overbought territory to try get back to its recent 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 haven’t performed well either with the Nikkei 225 also losing nearly 1% to finish at 42394 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 also fell back but not as much as its peers with the ASX200 closing 0.4% lower at 8935 points. SPI futures are up about 0.5% due to the late rally from Wall Street overnight however.
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 but watch for some attempt at selling here at local support:
European markets were pushed lower again by French stocks as political imbroglios spillover, with a mix of losses across the continent sending the Eurostoxx 50 Index 1% lower to finish at 5383 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 beginning to lose steam yet again with the recent falls taking out short term support:
Wall Street was able to regain some lost confidence with the NASDAQ finishing 0.4% higher while the S&P500 did the same, gaining nearly 0.5% to close at 6465 points, as it tries to get 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 as support begins to firm here:
Currency markets had seen a massive swing against “King” dollar on Friday night due to Fed Chair Powell’s comments, but volatility has seen a near reversal of these moves, with Euro leading the stabilising at the 1.16 level overnight.
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! Some of this has been taken back with a move back towards the 148 level overnight.
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 Pacific Peso is holding just below the 65 cent level in a relatively weak position in the short term.
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 positive momentum going as Brent crude lifted again overnight to extend its recent uptrend above the $68USD per barrel level after being stuck around the $66USD area for so long.
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 last week 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. This has mainly held overnight.
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!