A tumbling Wall Street overnight is not the real concern its bond markets that are signalling trouble ahead with the latest US initial jobless claim print before tonight’s US official job report – aka the non farm payrolls – that has got risk markets spooked. Add in a bit of war horns going off in the Middle East and volatility is really pumping across currencies as well with the USD firming again overnight against everything but Yen with the Australian dollar knocked back on the floor below the 65 cent level.
US Treasuries saw more big moves across the curve with the 10 year down another 10 points to crack below the 4% level while oil prices moderated ever so slightly as Brent crude eventually finished above the $80USD per barrel level. Meanwhile gold prices are relatively calm as they stabilise around the $2450USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are still struggling with the Shanghai Composite losing a little more than 0.2% to remain under 3000 points while the Hang Seng Index is dead flat at 17338 points.
The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session as it tried to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. Price action looked like turning this falling wedge pattern into something more bullish but is still looking like a dead cat bounce instead:
Meanwhile Japanese stock markets are reacting poorly to the big moves in Yen with the Nikkei 225 down nearly 2.5% to close at 38126 points.
Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term support was broken on this retracement, with futures indicating another sharp retracement in line with Wall Street’s returns:
Australian stocks were the best in the region, relatively speaking with the ASX200 closing just 0.2% higher to 8114 points.
SPI futures however are down nearly 2% so this could be a very shortlived breakout given the falls on Wall Street overnight. Momentum was back in overbought territory with this new record high getting risk spirits agitated but this bearish engulfing candle on the daily chart is ominous:
European markets failed miserably to get traction with big selloffs across the continent, despite a much lower Euro as the Eurostoxx 50 Index closed more than 2% lower to 4765 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance still looming at the 5000 point barrier. Former ATR support at the 4900 point level remains the anchor point but as I said I was wary of this one off move:
Wall Street couldn’t handle the negative waves with a poor performing manufacturing PMI plus earnings sinking the NASDAQ as it took back all of its recent gains to fall more than 2% while the S&P500 lost more than 1.4% to close at 5446 points.
The four hourly chart showed resistance overhead that had been tested last Friday before an early week slump that has now been tested and broken through, helped alongside a previously soaring NASDAQ. Momentum was somewhat oversold and has rebounded through to well overbought settings as price bounces off weekly support levels but now price action has returned – watch out below on tonights NFP print!
Currency markets are still volatile with King Dollar firming further against the majors despite a poor manufacturing PMI print and more signals that the Fed could have to cut sooner rather than later – and deeper. Euro was pushed back below 1.08 level after looking weak following the German inflation figures.
The union currency had previously bottomed out at the 1.07 level before gapping higher earlier in the week with more momentum building to the upside with the 1.0750 mid level as support but there is too much pressure here from King Dollar. There still could be a further retracement as ATR support has been taken out:
The USDJPY remains on a downwards pattern despite some intrasession volatility overnight with a return to the recent lows just above the 149 level overnight as the rate hike from the BOJ is still having a reaction.
This volatility speaks volumes as it once pushed aside the 158 level as longer term resistance, but then was unable to breach the 162 level as it looks like the BOJ intervention finally worked on the ever weakening Yen. This could go even further but momentum has subsided somewhat on the downside with a potential short term bottom forming here:
The Australian dollar continues to struggle following the local CPI print and again broke below the 65 cent level due to overnight USD volatility to almost make a new low for the trading week.
During June the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone but that has changed in recent weeks with price action finally getting out of the mid 66 cent level that acted as a point of control. This still looks very weak with medium term support still broken as we await the RBA’s next step:
Oil markets love a good old fashioned war in the Middle East but traders may have gotten a little ahead of themselves with a minor retracement overnight seeing Brent crude move back to the $80USD per barrel level.
After breaking out above the $83 level last month, price action had stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Daily ATR support had been broken with short term momentum still in oversold mode but watch for a potential follow through on this reversal as this swings into higher volatility:
Gold remains on trend after following through on its rebound above the $2400USD per ounce level but is starting to come up against some resistance at the $2450 level with price action stalling their overnight.
While it was the biggest casualty of the reaction to the recent US jobs report, the shiny metal was able to clock up some gains before this reversal, almost hitting the $2500USD per ounce level. The longer term support at the $2300 level remains key but that broken downtrend line from mid July looks like a good opportunity with momentum now nicely overbought:
