Overnight saw what could be the beginnings of a risk off mood as Wall Street was unable to get moving after the weekend, helped along by a dumping of crypto as Bitcoin made new lows. All eyes are still on the Fed’s December meeting where a rate cut is a given, but overnight saw some strength return to USD on the safe haven trade with concerns regarding the BOJ’s hawkish stance keeping Yen elevated while the Australian dollar nearly held on to its two week high above the 65 cent level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets lifted higher in afternoon trade with the Shanghai Composite up 0.6% to be above 3900 points while the Hang Seng Index finished nearly 0.7% higher at 26067 points.
The daily chart of the Hang Seng Index shows a complete fill of the March/April selloff with a resumption of buying above 26000 points as momentum tried to build but failed to push aside resistance. The latest small bounce off support does not have a lot of momentum here so I am wary:
Japanese stock markets lost ground however with the Nikkei 225 down more than 1.8% to get well below the 50000 point level, closing at 49303 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 was broken at the 50000 point level but daily momentum did not get considerably oversold so there might be life here:
Australian stocks were in pullback mode again with the ASX200 closing more than 0.5% lower to 8565 points. SPI futures are actually steady despite the falls 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 has been abandoned, as momentum builds for a broader selloff but watch for some stability that could turn into a bounceback above the 8500 point area:
European markets were again mixed across the continent with the German DAX falling 1% but the Eurostoxx 50 Index actually finished dead flat at 5668 points.
The market has been failing to make headway here due to the too high valuations but short term support was put under a lot of pressure before finding some buyers to stabilise, as this could turn back into a revisit of the recent highs:
Wall Street couldn’t help start the new trading month with a selling spree with the NASDAQ falling 0.4% while the S&P500 lost more than 0.5% to close at 6812 points.
The four hourly chart showed that resistance at the 6900 point level was still quite relevant after the bounceback from the end of the US government shutdown rally with recent price action trying to avert last week’s dead cat bounce pattern. Support has firmed at 6500 points, with confidence – aka the Fed punchbowl – returning in full as this looks like a near full fill:
After having fully processed the looming December rate cut by the Fed, currency markets got a little ahead of themselves in the overnight session as King Dollar firmed back a little, although this could be the start of a wider risk off mood. Euro held just above the 1.16 handle, after a quick breakout as the ECB is transmitting its happy with its current rate setting going into the new year.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area and is looking still on trend here:
The USDJPY pair kept on going down after the weekend gap, falling back to the 155 handle, but stabilised overnight despite the hawkish BOJ.
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 has now repeated this move. Watch for support which must hold here or it may crack below the 155 level quickly:
The Australian dollar has been on a tear due to the hot CPI print and Friday night saw it move further higher above the 65 cent level and again like other undollars it remains on trend but took some heat out overnight.
Price action was not looking good for the Pacific Peso in the medium term as the interest rate differential squeeze sent it back to the doldrums, but this has inverted as the RBA is probably holding for the foreseeable future alongside the RBNZ. Resistance at the 65 cent area has been pushed aside with a potential run up the 66 cent level:
Oil markets have been on a downtrend for many weeks now but Brent crude remains steady at just above the $63USD per barrel level gain on Friday.
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 is still potential here for a run down to the $60 level next but we haven’t had a new weekly low for awhile:
Gold was having a much better run than other undollars and zoomed through the $4200USD per ounce level last week on the weaker USD but also aligned itself overnight with a small pullback but remains well above that level.
This could be another slightly overdone in the short term ride but then after some more stability, yet another large upside potential move is looming again for the shiny metal as the desire for USD dwindles.
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!