Risk markets fell back overnight as the long expected cut from the Federal Reserve was followed by a lot of cautionary talk by Chair Powell, indicating that this may well be the last cut for awhile as the push through effect of tariffs on inflation might stall further cuts. Wall Street flopped back while the USD pushed back against all the majors and gold, with the Australian dollar in particular pulled into line after getting above the 66 cent level. Treasury yields jumped across the curve with the 10 year back above the 4% level.
Looking at stock markets from Asia from yesterday’s session, where Chinese share markets are getting back on track with the Shanghai Composite up 0.4% to return above the 4000 point barrier while the Hang Seng Index is down 0.3% to 26346 points.
The daily chart showed a complete fill of the March/April selloff and then some with a breakout above the 26000 point level looking like a sustained move here before the most recent Trump tantrum. The possible trade deal is seeing a resumption of buying here above 26000 points again:
Japanese stock markets are surging following the previous session selloff with the Nikkei 225 up nearly 2% at 51177 points.
Daily price action was looking extremely keen indeed as daily momentum accelerated after clearing resistance at the 42000 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 as the 50000 point level is now broken for an extended rally:
Australian stocks have taken a big hit on the local inflation news with the ASX200 losing nearly 1% to 8925 points. SPI futures are down further again, off by 0.3% due to the staid sessions on Wall Street overnight.
The daily chart pattern was suggesting further upside still possible with a base built above the 8700 point level as daily momentum tried to maintain its overbought status. Short term support is holding on, but the momentum is just not here and the punchbowl has been taken away:
European markets were again unable to make gains on further risk uncertainty despite the lower Euro as the Eurostoxx 50 Index eventually closed dead flat at 5705 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 the market was looking to make some good headway here despite the too high valuations but upside potential looks fleeting for now:
Wall Street is only being held up by tech stocks with the NASDAQ gaining slightly while the S&P500 finished dead flat after flirting with a down session over the Fed cut-and-wait approach, closing again at the 6890 point level.
The four hourly chart shows the recent breakout after last Friday’s CPI print all but expecting more punchbowl stuff from the Fed overnight – it remains to be seen if the AI bubble and the Xi-Trump talks to keep this going further:
Currency markets hinged on the actions and words of the Fed overnight, which saw the USD eventually push back against everything after the December cut expectations were pulled under the rug. Euro led the downturn with a swift reversal back to the 1.16 handle while the Canadian Loonie saw a blip lower after the BOC also cut rates to forestall further harm from its meth addicted southern neighbour.
The union currency had been building strength prior to the recent bad domestic economic news from the US overshadowed any continental slowdown but had reversed that trend in recent weeks. The potential breakout above the 1.17 level was getting more traction however momentum had slowed down before the Fed cut:
The USDJPY pair put in a consolidation phase before rallying overnight on the Fed cut, sending it back above the152 level overnight to recover most of its sharp start of week retracement.
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 recent internal political volatility that looks resolved could see some steady trends build from here, but watch for any waning in overbought momentum readings:
The Australian dollar had been under strain recently with the latest numberwang figures last week suggesting a potential November rate cut from the RBA but had been let free on Chinese positivity before last night’s Fed cut/wait approach saw it blip above the 66 level briefly before slammed back to the mid 65 handle instead.
This could become a more sustained breakdown if the China/US trade war heats up as I’ve opined that the Pacific Peso is not out of trouble although I’m wary of a lot of volatility here, but a short term double bottom pattern has been formed strongly on the four hourly and daily chart:
Oil markets got a wriggle on last week due to a surprise drawdown in US inventories but after the usual overshoot some stability has returned with Brent crude getting back above the $64USD per barrel level overnight.
The daily chart pattern shows the post New Year rally has a distant memory with any potential for a rally up to the $80 level completely dissipating. There was potential here for a run down to the $60 level next but wait and see if this one off bid turns into a trend:
Gold is failing to stabilise after a well needed correction down towards the $4000USD per ounce level recently, with a continued selloff overnight seeing it fall back to the $3920 zone.
This was looking very solid indeed as more central banks indicate more gold purchases and to be frank, confidence in the USD continues to crash but be wary of more downside volatility ahead this week. I noted a short term potential double top pattern forming here on the four hourly chart and these falls could extend well below the $4000 level but watch for some knife catching buying here:
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!