Wall Street loved the rate cut from the Fed last night and the apparently neutral not hawkish future position espoused by Fed Chair Powell. Other risk markets also saw a lift while the USD was poleaxed across the board with Euro up sharply. Oil prices saw a small lift as did other commodities while the Australian dollar made a new high for the year, almost hitting the 67 cent level against USD.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets saw some sharp selling before a mild recovery with the Shanghai Composite losing 0.2% to almost cross below the 3900 point level while the Hang Seng Index looked like continuing its recent decline but then rebounded at the close to finish 0.4% higher at 25540 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 which is forming:
Japanese stock markets also saw a mild selloff with the Nikkei 225 closing 0.1% lower at 50604 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 still processing the RBA positioning and waiting for Wall Street with the ASX200 losing 0.1% or so at 8579 points. SPI futures are up nearly 1% on the Fed rate cut so expect a Santa rally here!
The daily chart pattern shows that 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 again failed to find a solid bid across the continent as the Eurostoxx 50 Index finished some 0.2% lower at 5708 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 found its stripes on the rate cut with the NASDAQ lifting 0.3% while the S&P500 out on more than 0.6% to close at 6886 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 recently but support had steadied before the Fed meeting. The breakout here is pretty obvious, watch for a new high in tonight’s session to confirm a proper Santa rally:
Currency markets had been building further weakness in USD as we awaited the December Fed meeting but King Dollar was more than poleaxed on the new neutral not hawkish setting last night with Euro bouncing straight up to the 1.17 handle among other undollars in a swift reversal.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area previously and was looking on trend here although some internal resistance started to build but this was temporary as the reversal took effect overnight:
The USDJPY pair zoomed up to the 157 level but has now reversed swiftly back to the 156 level on the Fed cut overnight but could find some support in today’s session.
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 repeated this move. Watch for a potential retracement back to the dominant downtrend towards the 155 level next:
The Australian dollar has been on a tear due to the hot CPI print and the recently weaker USD and this has been reinforced if not pushed higher by the RBA hold with last night’s Fed rate cut sending it strongly higher again 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 moves to a much hawkish position. Resistance at the 65 cent area has been pushed aside with a run up through the 66 cent level which is now going to become support going forward:
Oil markets have been on a downtrend for many weeks now but saw a little life overnight on USD weakness with Brent crude heading back above the $62USD per barrel level.
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 is remaining above the key $4200USD per ounce level but having gone nowhere since last week it finally put in a decent bid overnight to make a new intraweek high near the $4230 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!