Overnight action on stock markets was muted given the selloff in bonds across most sovereign markets with Treasuries falling back following hawkish comments from all sides on inflationary pressures. It appears the Fed may soon adopt the cautiously hawkish approach going into 2026, even after a pre-Christmas rate cut, inline with other central banks which has given USD a little lift higher against some but not all the major currency pairs. The Australian dollar is waiting in anticipation of today’s RBA meeting where a hold is expected but all ears will be on the board’s expectations for 2026.
Looking at stock markets from Asia from yesterday’s session, where Chinese share markets are broke out in early trade with the Shanghai Composite up more than 0.5% to extend further the 3900 point level while the Hang Seng Index reversed course and lost more than 1% to close at 25765 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 of a dead cat bounce but watch for a break of the recent daily highs:
Japanese stock markets were somewhat steady after digesting the latest GDP print with the Nikkei 225 lifting nearly 0.2% to 50581 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. 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 are heading lower again with miners leading the selloff as the ASX200 fell nearly 0.4% at one stage to close just 0.1% lower at 8623 points. SPI futures are down a further 0.2% as traders await the RBA meeting.
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 8600 point area:
European markets failed to find a solid bid across the continent as the Eurostoxx 50 Index finished just 0.1% higher at 5725 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 was floating along going into this week’s Fed meeting but lost its cool overnight with the NASDAQ falling some 0.2% while the S&P500 retreated more than 0.3% to close at 6846 points.
The four hourly chart showed a steady if not exciting climb back to recent highs with somewhat firming support but that nascent trendline was broken overnight so watch for ATR support to come under pressure next:
Currency markets had been building further weakness in USD as we await the December Fed meeting but despite making a new two week low recent King Dollar is moving back into a slightly stronger setting on Fed and other central bank hawkishness. Euro retracted again to almost break its recent support level at the 1.16 handle while Pound Sterling and the Canadian dollar saw some movement lower.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area and is still looking on trend here although some internal resistance was starting to creep in as it retreats back towards the 1.16 handle:
The USDJPY pair found a floor to bounce off with a big move higher overnight after a poor week of performance amid speculation about BOJ rate hikes which almost saw it breach the 156 level.
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. This recent bounce back could have legs up to the previous monthly high ranges at the 157 or higher level:
The Australian dollar has been on a tear due to the hot CPI print and put on a nice trend given the national accounts print and the recently weaker USD but only just stayed above the 66 handle overnight in anticipation.
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 through the 66 cent level but watch for support to come under pressure here if the RBA loses any hawkish stancing:
Oil markets have been on a downtrend for many weeks now and with no resolution to the Ruzzian Ukrainian wartalks however Friday night saw some bidding up towards the $64USD per barrel level, but this was wiped out last night with a move back towards the $62 level instead.
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 so watch for a breakout run here:
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 has gone nowhere since to hold or settle slightly below that level overnight without losing support.
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!