Risk markets fell were uneasy overnight on the so-called US-China truce out of the summit between the Trump and Xi regimes with Wall Street falling back despite very solid earnings from Amazon as Meta was dumped more than 11% on AI troubles. The USD reasserted its recent strength against all the majors – except gold – with Euro and Pound Sterling falling sharply while the Canadian Loonie has given up its recent gains. The Australian dollar also fell back to the mid 65 cent level to its start of week position.
Looking at stock markets from Asia from yesterday’s session, where Chinese share markets fell back sharply into the close with the Shanghai Composite down more than 0.7% to retreat below the 4000 point barrier while the Hang Seng Index was closed for a holiday.
The daily chart of the latter 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 slipping slightly as well with the Nikkei 225 down nearly 0.3% at 51147 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 are putting in more losses with the ASX200 closing nearly 0.5% lower to 8889 points. SPI futures are relatively stable but expect further falls on the open given the selloff 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 5699 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 was only being held up by tech stocks and any tumult within showed throughout with the NASDAQ losing more than 1.5% while the S&P500 finished more than 0.5% lower at the 6824 point level.
The four hourly chart shows the recent breakout after last Friday’s CPI print but then a lack of momentum after the Fed spiked the punchbowl, so even “good” macro news coming out of the Trump/Xi truce talks is not being received well. Watch for a potential retracement that could extend back to the 6800 point level:
Currency markets are still reeling from the actions and words of the Fed meeting the other night, which saw the USD eventually push back against everything after the December cut expectations were almost eliminated. This continued overnight as Euro sold off below the 1.16 handle while the Canadian Loonie saw another move lower alongside other major undollars.
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 so watch for more downside here:
The USDJPY pair put in a consolidation phase before rallying on the Fed cut, which has now seen it surge above the 154 level overnight to extend well past its start of week retracement starting point.
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 and this recent volatility is wanting to repeat this move:
The Australian dollar had on a breakout above the 65 cent level recently but this week’s Fed cut/wait approach saw it first blip above the 66 level briefly before slammed back to the mid 65 handle where it stayed overnight in a tenuous position.
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, with a re-visit down to the 64 level not unlikely:
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 remaining around 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 doing to better to stabilise after a well needed correction down towards the $3900USD per ounce level recently, with a small bounceback overnight finally getting it back above the $4000 area, possibly setting up a comeback.
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 that these falls could extend well below the $4000 level but watch for a potential rebound above ATR resistance 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!