A sea of red across risk markets overnight as Wall Street didn’t like the too-good Fed Biege Book which is showing strong employment and economic growth and again puts doubt in mind for the next Fed rate cut. European shares followed suit after recently giving up all their early week gains while the USD was driven much higher. The Australian dollar slumped nearly to a two week low to finish just above the 66 cent level.
10 year Treasury yields lifting some 8 points to be above the 4.6% level while oil prices suffered a minor setup which saw Brent crude retrace back to the $83USD per barrel level. Gold had another losing session as it finished down below the $2340USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were up initially but gave up their gains at the close with the Shanghai Composite steady while the Hang Seng Index lost nearly 1.8% to 18497 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 was looking way overextended but this retracement is now taking some heat out of the market but needs to stop soon before moving into corrective mode:
Meanwhile Japanese stock markets are also losing confidence with the Nikkei 225 managing a 0.7% loss to 38556 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 resistance had been defended with short term price action now rebounding off former support at the 39000 point level with short term momentum no longer indicating a potential breakout, with futures retracing heavily:
Australian stocks had some steep falls, with the ASX200 down 1.3% to 7665 points.
SPI futures are also down nearly 0.7% due to the poor lead from Wall Street overnight. The daily chart was showing a potential bearish head and shoulders pattern forming with ATR daily support tentatively broken, taking price action back to the February support levels. Momentum was finally getting out of its oversold condition but it looks like any potential upside is sliding back again:
European markets continued their reversal all across the continent with the Eurostoxx 50 Index closing sharply down more than 1.3% lower at 4963 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 is still looking to turn into a larger breakout with support at the 4900 point level quite firm but resistance has proven too strong overhead:
Wall Street didn’t like the good economic news narrative with the NASDAQ playing catchup, down 0.6% or so while the S&P500 fell more than 0.7% to cross below the 5300 point level, finishing at 5266 points.
The daily chart was showing a large move higher as all Fed roadblocks seemingly were cleared with price action getting well out of its previous slightly stalled position above the 5200 point area. However the four hourly chart was showing a lot of hesitation here at the 5300 point level as short term momentum reverted and is now well oversold for a two week low:
Currency markets are witnessing a much firmer USD as the Beige Book and comments from Fed officials saw King Dollar firm against almost everything, with Euro losing all of its most recent advances to fall back to the 1.08 handle proper.
The union currency had previously bottomed out at the 1.07 level at the start of April as medium term price action with a reprieving reversal in price action back towards the 1.09 level before its own inflation print. Medium term support at the 1.0630 level has been respected but short term support has been broken here at the 1.08 level with momentum clearly oversold:
The USDJPY pair was able to advance further from its new weekly high to get back above the mid 157 level after looking positive before the recent consumer confidence print.
This price action post the epic BOJ meeting volatility was much more welcome but this reversal is not that surprising given the weakness of the USD. ATR support at the mid 156 handle continues to be defended and ramps up:
The Australian dollar was facing increasing pressure as more pro-US economic measures come in while the local economy is staring down recession, with the Pacific Peso taking another strong hit as it again returned to the 66 level.
The Aussie has been under medium and long term pressure for sometime before the recent RBA and Fed meetings and while there was optimism in the last couple of weeks, resistance at 67 cents was too high to breach. I still reckon the 66 handle will break soon as successive levels of resistance continue to ramp down:
Oil markets are trying harder to get back on track as the trend remains down throughout April and May with Brent crude unable to make good on its recent breakout, retracing back down to the $83USD per barrel level overnight.
After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Watch daily ATR support here at the $86 level which is still broken and will likely be resistance for sometime:
Gold was able to stop falling on Friday night with a mild rebound, but this is being taken back on the strong USD trend as it fails to get back above the $2400USD per ounce level, finishing just below the $2340 level this morning.
Short term momentum has retraced out of oversold mode but remains negative with the target to reach in this rebound at trailing short term ATR resistance at the $2380 level:
