Overnight saw the release of a very strong US ISM manufacturing PMI print which gave industrial stocks on Wall Street a big lift and will likely spread to a risk on mood here in Asia on the open. The USD saw a small lift against most of the undollars as Euro fell below the 1.18 handle as it continued its major reversal while Treasury yields lifted.
Oil prices pulled back sharply on the lack of a war in Iran while the Australian dollar held below the 70 cent level with some stability returning as we await today’s RBA meeting with a near certain rate rise.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets fell sharply in the afternoon session with the Shanghai Composite down more than 2% to nearly break below the 4000 point level while the Hang Seng Index was down at least 3% at one stage before closing 2.2% lower at 26775 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 as it broke out above the 27000 point level. However momentum got extremely overbought with a reversal in play here:
Japanese stock markets were back in the negative zone with the Nikkei 225 down over 1% to break the 53000 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. This was looking like a launch point through longer term overhead resistance but the selloff in Japanese bonds and the election snap call is causing a stall but not yet a full reversal here:
Australian stocks couldn’t escape the selloff across the region with the ASX200 closing 1% lower to 8778 points however this might be brought around as SPI futures lifted over 1% in reaction to the rally on 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 building into what looked like a solid breakout, but has since reversed. I’m watching ATR trailing support to come under pressure next in a wider risk off move but its holding so far:
European markets are loving the falling Euro with the Eurostoxx 50 Index closing nearly 1% higher at 6007 points overnight, almost taking them back to the former highs.
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 stronger than expected. This is looking promising again:
Wall Street jumped at the positive economic prints as the NASDAQ and the S&P500 both gained more than 0.5% with the latter closing at 6977 points.
The four hourly price pattern is a solid fill and bounce back that is almost back to the recent highs after setting up for a rollover so watch for another attempt at cracking the 7000 point level proper next:
Currency markets are swinging back to King Dollar overnight and in anticipation of this week’s non-farm payroll print on Friday. The latest ISM PMI helped as well with the extremely oversold DXY Index bouncing back as Euro fell below the 1.18 handle overnight, with Pound Sterling and Canadian Loonie also drifting lower.
The union currency’s four hourly candle and technicals suggested an extremely overbought condition beforehand as I mentioned so some profit taking here but trailing support was not respected here as I expected so watch for continued falls:
The USDJPY pair continues to bounceback with USD strength sending the pair back above the 155 level overnight.
However the start of year position at the 158 handle is way out of bounds for now with this rebound being relatively inconsequential as we await the Japanese elections and other missives from the BOJ. Overhead resistance has been cast aside with price action now above the previous gap down level:
The Australian dollar had recently soared higher alongside gold due to USD weakness, extending its push above the 70 handle on overall “Sell America” but gave up ground like other undollars although some resilience is showing here as it steadies at the mid 69 level overnight.
Short term support was shoring up here as the RBA meeting comes into the picture but overhead resistance is having trouble been pushed aside here:
Oil markets have been on a multi week/monthly downtrend prior to the Venezuelan invasion but shot out of the gate last week with some big gains before settling into a sideways pattern and then breaking down when the war premium was lost as Trump held fire against Iran over the weekend. Brent crude snapped back to the $66USD per barrel level smartly where it remains in a holding pattern again:
Gold had been accelerating into a blowoff pattern having blasted through the $5500USD per ounce level in recent sessions but the retreat back to the $5300 level on Thursday night before a huge retracement on Friday night is still continuing as a rout below the $4700 level overnight although some stability maybe returning.
The shiny metal had been lifting ever since the Dementia Don Davos drivel with trend lines becoming more and more parabolic – I did indicate a probable top but a one way trade that led to this volatility as no one wanted to go short until it was too late:
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!