Wall Street is slowly drifting into holiday mode as risk markets peer through to 2026, with volatility contained to currency markets as Yen weakens significantly on the back of Friday’s rate hike by the BOJ. The USD took back some losses against some of the other majors with Euro now at a two week low while the Australian dollar is just holding on above the 66 cent level.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets saw a solid bid in afternoon trade with the Shanghai Composite up 0.4% to 3890 points while the Hang Seng Index lifted more than 0.7% to 25690 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 another dead cat bounce forming:
Japanese stock markets were the biggest winners on the BOJ rate hike with the Nikkei 225 up 1% to 49507 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 looked very stretched and setup for a small correction before the BOJ meeting. The Friday bounceback and weakening Yen is setting up for another attempt back at the 50000 point level:
Australian stocks did reasonably well in afternoon trade with the ASX200 closing 0.4% higher to 8621 points. SPI futures are up a solid 0.4% on the strong session on Wall Street from Friday night.
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 remain on trend with some modest gains on Friday night with the Eurostoxx 50 Index up 0.3% higher at 5760 points.
The market had been failing to make headway here due to the too high valuations but short term support was able to handle the pressure before finding some buyers to stabilise, as this could turn back into a revisit of the recent highs:
Wall Street continues to bounceback with the NASDAQ pushed nearly 1.3% higher while the S&P500 gained 0.9% to close at 6834 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 were in a holding pattern following the softer than expected US CPI print and the looming break over the New Year but are getting charged up again on the recent volatility around the BOJ rate hike as the Euro cross hit a new record high while Yen fell more than 200 pips against USD on Friday. Other majors remain under a little more stress than to be expected although the Canadian Loonie is performing better than most. Euro fell back to the 1.17 handle proper after failing to get above the 1.18 level all week.
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 – watch for a potential break on lower volumes:
The USDJPY pair was in a short term holding pattern waiting for the Japanese inflation print and subsequent BOJ meeting but has subsequently exploded out of the gate more than 200 pips to the 157 handle on Friday night despite a lot of talking the currency down by the Japanese finance minister.
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. This could get more exciting in the next few sessions but its significantly overbought in the short term:
The Australian dollar continues to weaken and stay well below the mid 66 cent level but is finding some support at the 66 handle proper although that is dwindling as we head into the New Year break.
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 recently pushed below the $59USD per barrel level with a small lift on Friday night back above the $60 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 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 on Friday night following the CPI print to finish at the $4338USD per ounce level.
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!