The trading week hasn’t yet got underway as US markets were closed for the long weekend holiday, with intrasession volatility across all the risk markets fairly flat as a result. European stocks lifted slightly, reflecting the modest moves here in Asia beforehand. Futures are looking optimistic however for a solid start when Wall Street reopens tonight. Currency markets had a breather too with Euro still unable to get back above the 1.11 handle while the Australian dollar was also unable to return to its previous strong position, now holding just below the 68 cent level.
German 10 year bund yields were up slightly with bond markets positioning for Friday’s US NFP print while oil prices were sanguine as Brent crude futures indicate a hold around the $77USD per barrel level. Gold is again struggling to make headway with very quiet sessions – usually a harbinger of increased volatility ahead – as it failed to get back above the $2500USD per ounce zone.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets pulled back sharply at the close with the Shanghai Composite down more than 1% while the Hang Seng Index had a worse start to the week, closing more than 1.7% lower to 17691 points.
The Hang Seng Index daily chart was starting to look more optimistic a few months back but price action has slid down from the 19000 point level and continues to deflate in a series of steps as the Chinese economy slows. A few false breakouts have all reversed course and another downside move is again looming here as price action won’t clear short term resistance:
Meanwhile Japanese stock markets were looking weak at one stage before regaining at the close with the Nikkei 225 finishing 0.1% higher at 38700 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 subsequently broke on that retracement, and then the front fell off. We are now seeing a big fill here but Yen volatility is coming back so a sustained return above the 38000 point level from May/June is still possible:
Australian stocks had somewhat of a sideways session with the ASX200 closing just 0.2% higher at 8109 points.
SPI futures are fairly flat without a solid lead from the closed Wall Street overnight. Short term momentum and the daily chart pattern was potentially signalling a top here and this combination could still eventuate, but for now watch support at or just below the 8000 point level:
European markets were generally positive with some mild gains across the continent as the Eurostoxx 50 Index closed 0.3% higher at 4973 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 just unable to breach the 5000 point barrier. Price has cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum was slowing before this solid move:
Wall Street was closed for the Labor Day long weekend with S&P futures indicating a solid start once traders return to their desks later tonight. The four hourly chart illustrates how this bounceback had cleared the mid 5300 point level with momentum retracing fully from oversold to very positive these past two weeks. The potential for a positive breakout was building for a swift return to the early August highs as price has respected short term support:
Currency markets were basically unchanged due to the lack of US traders for their long weekend holiday with USD still proving somewhat strong against most of the majors. Euro has settled here just below the 1.11 handle looking weak as the trading week gets underway proper later tonight.
The union currency was looking overbought in the short term as I mentioned before, but had also been structurally supportive so this extended dip is now threatening to turn into a wider rout if it can’t get back above former support at the 1.11 handle:
The USDJPY is doing really well to get out of its downwards medium term pattern with a follow through after the weekend gap to return well above the 146 handle, almost breaching the 147 level overnight.
The overall volatility leading up to the recent rout spoke volumes as it pushed aside the 158 level as longer term resistance in the weeks leading up to the BOJ rate hike. Momentum was suggesting a possible bottom was brewing as the BOJ wants to get this under control with this breakout building, but watch out for a possible retracement towards the end of the week at the NFP print looms:
The Australian dollar has been pushing higher on the weaker USD but it finally broke its short term uptrend on Friday night, retreating below the 68 cent level but not short term support, which so far has been defended as it wants to return to those highs.
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. A breakout was brewing here on the four hourly chart as price action matched the previous high but the momentum is not there:
Oil markets are failing to move out of their previously weak position as volatility builds with Brent crude holding here at the $77USD per barrel level due to a lack of trading volume overnight.
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 as this swings into higher volatility:
Gold is barely keeping above the $2500USD per ounce level as intrasession volatility reduces as it can’t seem to return to its previous high from mid-August, settling at the $2499 level overnight alongside other weak undollars.
The longer term support at the $2300 level remains firm while short term resistance at the $2470 level was the target to get through last week as I indicated. This is still looking a little overextended and dependent on USD weakness:
