The selloff in stocks continued overnight as Wall Street reeled following the ratings downgrade by Fitch with the USD further advancing against the major currency pairs in a safe haven scramble. The Australian dollar is suffering the most, falling straight down to the 65 cent level and could have further to go as the Bank of England meets tonight and then tomorrow we get the much anticipated July US non-farm payrolls jobs report
US bond markets saw further selloffs with the 10 year Treasury extending its move above the 4% level for a new five month high while oil prices dropped back on a very large inventory draw, with Brent crude down to the $83USD per barrel level. Gold is failing to beat back the USD uptrend as it extended its retracement back to the $1930USD per ounce level.
Looking at share markets in Asia from yesterday’s session with mainland Chinese share markets are having down sessions with the Shanghai Composite closing nearly 1% lower at 3256 points while in Hong Kong the Hang Seng Index pulled back even further, down 2.5% to again reject the 20000 point barrier, closing at 19517 points.
The daily chart was showing how the 19000 point level has become strong support as price action bursts above the dominant downtrend (sloping higher black line) following a month long consolidation. This breakout could have further legs but daily momentum readings were getting into extreme levels and presaging a pullback so watch for support to firm here:
Japanese stock markets were also spooked with the Nikkei 225 closing nearly 2.3% lower at 32707 points.
Trailing ATR daily support has paused for sometime now as the market has been going sideways after a big lift recently, with a welcome consolidation above that level. Daily momentum has was back at overbought settings with this retracement down to the support zone supposedly turning into a breakout on the weakening Yen trend but the recent catalyst could abate further upside:
Australian stocks sold off sharply as well with the ASX200 closing 1.3% lower at 7354 points.
SPI futures are down a further 0.8% as this rout gathers downside momentum with big falls on Wall Street overnight, and now we find out if the 7300 point level has firmed as short term support instead of resistance. Medium term price action was slowly getting out of its downtrend with the daily chart showing a breakout here as the June highs are bested but watch daily momentum readings that needed to stay overbought:
European markets also continues to sell off across the continent with the Eurostoxx 50 Index closing more than 1.6% lower to retrace well below resistance at the 4400 point level, finishing at 4336 points.
The daily chart still shows weekly support at 4200 points defended well with weekly resistance at the 4400 point resistance level broken but the daily bearish engulfing candle in the previous session showed my concern. Now we’ve had the 4400 point level broken so expect a possible return to 4200 points swiftly:
Wall Street also lost the plot with the NASDAQ losing more than 2% while the S&P500 finished 1.3% lower at 4513 points.
The four hourly chart was showing a sideways bent after the previous weekly uptrend that got a little out of hand recent with a consolidation that has now turned into a dip. The 4600 point zone was the area to watch going into this week’s NFP print but this retracement needs to get back above the 4550 area fast or could spread further:
Currency markets remain on the USD side with everyone waiting for the tomorrow night’s US jobs report – aka non-farm payrolls – but still absorbing this latest Fitch downgrade. This is evidenced by Euro continuing its decline following last week’s ECB meeting with a return to the 1.09 level this morning.
Euro had halted its week plus long decline after hitting support just above the 1.10 handle mid week before getting slammed back down to the 1.09 handle and then bouncing slightly back on Friday night. Short term momentum remains negative so I’m watching for another rollover tonight:
The USDJPY pair is also re-engaging to the upside after last week’s BOJ meeting with an impressive rebound that is keeping the pair above the 143 handle but despite a mild pullback has returned to those highs.
Four hourly momentum was in considerably overbought mode with price action now matching the recent weekly highs following a very good weekend gap higher. This leaves room for more potential upside as the USD continues to firm into Friday’s US jobs report but I’m wary of a mild pullback here:
Last week, the Australian dollar was pushed decisively down on ECB dovishness and then again on the US GDP print, keeping the Pacific Peso depressed and further smashed down to the 65 cent level as the RBA makes it the weakest of the majors.
Recent price action put ATR resistance and 200 EMA (black line) levels under threat but short term momentum has rolled over into oversold status, confirming a break of weekly support and setting up for more downside below:
Oil markets had been advancing on their recent gains but a private inventory report saw a mild selloff overnight with Brent crude retracing back to the $83USD per barrel level, still maintaining a three month high however.
Price had been anchored around the December levels – briefly dipping to the March lows – with the latest move matching the small blip higher in May and now putting aside resistance at the $80 level. Daily momentum has picked up strongly into overbought readings with price action now clearing the last couple months of resistance and setting up for a new potential uptrend:
Gold was trying to get back after its mid-session rout last week following the Fed’s latest rate rise, but extended its new weekly lows overnight with a fall below the $1940USD per ounce level.
The four hourly chart shows the attempt at getting back up to the psychologically important $2000USD per ounce level is likely over as a new two week low made swiftly cannot be returned as such without a lot more effort. Watch for a potential unwinding here down to $1900:
