Wall Street accelerated its recent falls with tech stocks again leading the way as risk markets absorbed the implications of a four year high in US unemployment while paradoxically the USD rose slightly even as Fed officials admitted the soft labour market will require more rate cuts in 2026. The latest UK inflation figures undershot, pushing Pound Sterling down while Euro rebounded slightly as Yen also faces the pressure of the upcoming BOJ meeting. The Australian dollar drifted almost below the 66 cent level with another weak session.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets are seeing a stronger bid in afternoon trade with the Shanghai Composite up more than 1% to 3872 points while the Hang Seng Index has also rebounded nearly 1% higher to close at 25468 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 had a milder session with the Nikkei 225 up just 0.2% to 49512 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 and daily momentum is now back to negative settings so this is setting up for a potential correction next:
Australian stocks fell back slightly in afternoon trade with the ASX200 losing 0.2% to 8585 points. SPI futures are down only 0.2% or so despite the big falls on Wall Street overnight.
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 were still climbing on trend but had another big wobble overnight as the Eurostoxx 50 Index finished some 0.6% lower at 5681 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 has moved from stumbling around to outright selling with tech stocks leading the way as the NASDAQ dropped nearly 2% while the S&P500 went down 1.2% to close at 6721 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 was pretty obvious but has turned out to be a fake out so watch for continued selling below support:
Currency markets continue to selloff USD by and large with a near 3% decline in recent weeks by the DXY across the main undollars with Euro holding strong from its Friday night position. Overnight it almost went above the 1.18 handle in a volatile session before finishing where it started on the NFP and UK employment releases.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area previously and is now accelerating above the 1.17 level although maybe getting ahead of itself in the short term:
The USDJPY pair was taken down to the 156 level on the Fed cut and is now pre-positioning before the BOJ meeting with a fall below the 155 handle overnight on the NFP prints.
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 below the 155 level next:
The Australian dollar saw some volatility post the RBA hold versus the Fed rate in the previous week but held out amid the slightly risk off nature of markets on Friday night, although it continues to weaken below the mid 66 cent level with another small dip 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 multi week/monthly downtrend with Brent crude now pushed below the $59USD per barrel level overnight in a strong selloff on USD weakness, taking the market back to the April lows.
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 gone. There was potential for a run down to the $60 level where the monthly lows sit at key critical support next and now that has been broken – boo hoo for Saudi Arabia and Ruzzia!
Gold is still using the key $4200USD per ounce level as support but hasn’t made any new highs in recent sessions but staying around the $4300 level it breached on Friday night.
As I previously mentioned that after some stability, another large upside potential move was looming again for the shiny metal as the desire for USD dwindles and here we are:
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!