A blowout in US unemployment claims, a collapse in cryptocurrencies and more unease over the AI uber-bubble added to rise in volatility across risk markets overnight as Wall Street fell back again, taking other markets with it. The USD continued its comeback against most of the majors, particularly the Aussie, Loonie and Kiwi while the hold from the ECB and BOE kept Euro and Pound Sterling in a holding pattern. All eyes are pivoting to the US unemployment NFP print tonight.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were down sharply in the afternoon session with the Shanghai Composite off by nearly 1% to cross back below the 4100 point level while the Hang Seng Index is off more than 1.3% to 26506 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 still in play here:
Japanese stock markets were pulling back as well with the Nikkei 225 down nearly 1% to cross below 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. This was looking like a launch point through longer term overhead resistance but the selloff in Japanese bonds and the election snap call was causing a stall but this is looking promising here:
Australian stocks were the best performers relatively speaking with the ASX200 down just 0.4% to 8879 points with SPI futures down by at least 1% due to the continued falls 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 can’t rely on a falling Euro with more selling overnight with the Eurostoxx 50 Index closed nearly 0.8% lower at 5925 points, still unable to reach its 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 was looking promising but again I’m cautious:
Wall Street is now moving closer to correction mode as the NASDAQ fell another 1.5% while the S&P500 lost more than 1% to close at 6798 points.
The daily price chart has now completed a bearish rising wedge pattern, breaking the lower bound area with daily momentum now well into oversold territory – a clear signal something is coming:
Currency markets kept swinging back to King Dollar overnight with Euro holding below the 1.18 handle, with Pound Sterling eventually accelerating its falls later in the session.
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 so I’m looking for a continued break below the 1.18 handle next:
The USDJPY pair continued its bounceback with USD strength pushing it further overnight, extending the gains to break the 157 handle.
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 a small correction going into the RBA meeting with the bounceback above the 70 cent level on the expected rate hike unable to hold steady overnight on lower commodity prices as the start of week low comes into view.
This was looking to become a move back to the previous highs from last week but momentum was barely positive here so I expect a further retracement going into the NFP print:
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 Iranian war premium was discounted. However the bombs may yet start falling again although Brent crude fell back to the $67USD per barrel level overnight:
Gold is failing to get back on track after a near $1000USD per ounce drop as it remains well below the $5000 level with a continued retracement overnight.
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. Now we have the inevitable dead cat bounce with momentum not yet positive:
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!