Its all about Iran across risk markets as “peace” President Trump looks set to attack another country (how many is that this year so far) with oil prices still in the balance despite a big lift in US inventories overnight. The latest earnings on Wall Street offset better than expected retail sales numbers but Wall Street still dropped. The USD slid back against most of the majors on the latest PPI report but firmed later in the session as FX volatility reduces while 10 year Treasury yields dropped back again. The Australian dollar has fallen back below the 67 cent level but is finding some support.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets stalled again in the afternoon session with the Shanghai Composite up just a handful of points while the Hang Seng Index has lifted some 0.5% to 26999 points.
The daily chart of the Hang Seng Index showed a lot of wish washy action around the 26000 point level in the last couple of months with some recent weakness now turning into strength. The latest small bounce off support does have more momentum brewing but is facing resistance overhead:
Japanese stock markets continue to be bid strongly with the Nikkei 225 putting on another 1.4% to crack the 54000 point level.
Daily price action wavered a little during the BOJ hike in the previous weeks but has firmed up strongly with the 50000 point level forming key support although it has gotten ahead of itself. This looks like a launch point through longer term overhead resistance:
Australian stocks managed to only just finish in the green as the ASX200 lifted a smidge over 0.1% higher to 8820 points. SPI futures however are up only slightly on the poor lead from Wall Street overnight.
The daily chart pattern shows that short term support has been reinforced after a period of hesitation before Christmas with a bounceback above resistance at the 8800 point area now building:
European markets slid back across the continent as the Eurostoxx 50 Index closed 0.4% lower to 6005 points, still keeping the recent rally intact but indicating some resistance building.
The market had been failing to make headway in recent months due to the too high valuations but short term support was very solid and has pushed well above recent highs to start 2026 with some gusto, helped by a much lower Euro:
Wall Street however failed to move higher due to some poor earnings reactions with the NASDAQ down 1% while the S&P500 lost another 0.5% to close at 6926 points.
The daily chart showed a belated Santa rally that took back some of the gains to match the November highs but it still looking somewhat supported on the four hourly chart below with the potential to lift up towards the 7000 point level still being thwarted by geopolitical and other risk factors:
Currency markets have failed to reverse their move against King Dollar even though there’s been plenty of catalysts to pivot off (poor NFP, Powell attack, Venezuelan invasion) with the Iranian situation firming into a safe haven play. The USD reversed course briefly again overnight on the PPI print but then Euro continued its slide to stay up below the mid 1.16 level with other majors not making any meaningful gains either.
The union currency had already been pushed down to the 1.17 handle during the Xmas period and after a small bounceback put on a dead cat bounce here as the end of NATO looms on the horizon. Watch for a break below the recent lows at the 1.16 level next:
The USDJPY pair pushed well above the 157 handle on the new year sessions, despite stronger inflation in Japan with a move above the 159 level at the start of the week reversed a little overnight but still showing signs of a very weak Yen.
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. A little heat has been taken out after being overbought but has more upside potential:
The Australian dollar was pushed down to the 67 handle on the NFP print on Friday night before a small bounce like all the other undollars on the Powell putdown but has since reversed and headed back below this key level 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 short term support is barely shoring up again so I don’t see a lot of upside here:
Oil markets have been on a multi week/monthly downtrend prior to the Venezuelan invasion with not much upside thereafter, but things are brewing as Brent crude shot up above the $65USD per barrel in a quick rally on the Iranian revolts before getting quite volatile overnight on the big US gasoline inventory build up report.
The daily chart pattern shows an extended downtrend that is now well under threat and broken in the short term so watch for this to potentially turn into a proper reversal although it is well over extended in the short term:
Gold has made a serious comeback on USD volatility with a continued breakout above the $4500USD per ounce level on Friday night as it remains above the $4600 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, albeit very overbought as short term resistance forms slightly:
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!