A paradoxically unvolatile session overnight as Wall Street bounced back on a surprise downside print in US inflation while the ECB and BOE held fire on interest rate rises all of which barely moved currency markets. Asian share markets should expect a boost in the final full volume trading session before the Xmas break with the Australian dollar holding steady at the 66 cent level against USD.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets saw seeing a small recovery in afternoon trade with the Shanghai Composite up 0.2% to 3876 points while the Hang Seng Index recovered after a mild pullback earlier in the session to close 0.2% higher at the 25498 point level.
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 forming:
Japanese stock markets were the biggest losers with the Nikkei 225 down 1% to 49001 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:
Australian stocks were relatively steady after falling back slightly in afternoon trade with the ASX200 closing at 8588 points. SPI futures are up a solid 0.5% on the strong session 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 able to get back on trend as the Eurostoxx 50 Index finished more than 1% higher at 5741 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 love the softer economic data as the NASDAQ pushed nearly 1.4% higher while the S&P500 gained 0.8% to close at 6774 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 bounceback has been good so far in the short term but overall the market looks peaky:
Currency markets are now in a holding pattern as the softer CPI print from the US seems to confirm the neural setting of the Fed while other central banks look to fight their own inflation battles. The USD was basically unchanged overnight despite a BOE and ECB meeting with today’s BOJ meeting the only major catalyst to react to before the Xmas period. Euro was able to finish above the 1.17 handle without a new session low.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area previously and was accelerating above the 1.17 level but after getting ahead of itself in the short term is stuck just above trailing support:
The USDJPY pair is now in a short term holding pattern waiting for today’s Japanese inflation print and subsequent BOJ meeting with a hold at the 155 handle overnight.
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 continues to weaken below the mid 66 cent level but saw some life overnight on the weaker US CPI print with a hold just above the 66 handle proper.
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. However the recent selloff is putting some doubt into that position:
Oil markets have been on a multi week/monthly downtrend with Brent crude pushed below the $59USD per barrel level where it is now oscillating as news come in on the Trump regime’s potential invasion of Venezuela (Operation Epstein I believe its called?)
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 and almost made a new session high overnight on the CPI print but then steadied just below the recent highs above 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!