A sudden reversal in risk markets overnight as more concerns about a hawkish approach by the Fed overshadowed what looks like more ammunition for a sooner rate cut than later. Wall Street pulled back alongside everything else while the beleagured USD finally found some strength against the majors. Euro pulled back about 50 pips or so while the Australian dollar almost broke below the 67 cent level.
10 year Treasury yields had the biggest moves with a lift of nearly 10 points to just below the 3.9% level while oil prices came back slightly with Brent crude lifting back above the $77USD per barrel level. Gold unfortunately was unable to hold above the $2500USD per ounce level for a slight loss.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets pushed lower again with the Shanghai Composite down 0.3% while the Hang Seng Index had another boost out of the blue, closing more than 1.2% higher to 17602 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 was looming here but this breakout has some potential if it clears short term resistance:
Meanwhile Japanese stock markets are struggling on Yen volatility with the Nikkei 225 closing 0.3% lower to 37951 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 return to the 38000 point level from May/June is still possible but could be a rough road:
Australian stocks eked out another small gain with the ASX200 lifting 0.2% to extend above the 8000 point level.
SPI futures are down at least 0.5% due to the retracement on Wall Street overnight so we should see continuation above the new record high today. Former medium term support at the 7700 point level will remain under pressure here as trader’s absorb the RBA’s signalling of no punchbowl for the rest of 2024, but short term momentum is starting to look good again here:
European markets were unable to get going again with various falls and rises across the continent as the Eurostoxx 50 Index finished flat at 4885 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. Instead, former ATR support at the 4900 point level was only a temporary anchor point as we remain deep down into correction territory. Price has cleared the 4700 local resistance level to get out of trouble:
Wall Street however completely run out of steam and then turned on the selling taps with the NASDAQ losing more than 1.6% while the S&P500 closed nearly 0.9% lower to 5570 points.
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 here as it tried to return to the early August highs but this retracement takes out ATR support so watch closely for further downside:
Currency markets stopped moving against USD in the wake of the latest initial jobless claims numbers overnight. Euro slipped back to the 1.11 level as a result but still looks firm here.
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 was still too much pressure from King Dollar. This was looking encouraging but very overbought in the short term so more downside could be building here to ATR trailing support:
The USDJPY is trying to get out of its downwards medium term pattern as the carry trade unwinds with a small tick higher overnight to get back above the 146 handle but still at a low for the trading week.
The overall volatility speaks volumes as it pushed aside the 158 level as longer term resistance in the weeks leading up to the BOJ rate hike. Momentum is suggesting a possible bottom is brewing as the BOJ wants to get this under control:
The Australian dollar was pushing higher on the weaker USD and the recent soft unemployment print but its starting to roll over once again with a retracement back to the 67 handle.
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 level will now switch to support so watch for any retracements as buying opportunities:
Oil markets are failing to move out of their previously weak position as downside volatility builds keeps Brent crude around the $76-77USD per barrel level again 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 has kept above the $2500USD per ounce level from last weekend gap but failed to hold on to this overnight as it was already losing short term momentum despite the weaker USD. Only a sniff of USD strength has seen it buckle here to finish at the $2485 level this morning.
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 so I expect a minor pullback unless USD weakness continues tonight:
