Wall Street capped off a volatile trading week on Friday night with strong gains across the board as risk markets absorbed the triple whammy of Fed, ECB and BOJ central bank meetings. While the ECB was somewhat dovish and the BOJ made no material change to its yield control policies, markets still need to grapple with a stronger than expected US GDP print as expectations of more interest rate rises from the Fed kept the USD highly elevated against the majors. The Australian dollar slumped to 66 cents as a result.
US bond markets saw a big lift across the yield curve with the 10 year surpassing the 4% level while oil prices held on to their recent gains with Brent crude now above the $84USD per barrel level. Gold suffered alongside other undollars but managed to clawback some of the losses on Friday night, settling at the $1960USD per ounce level.
Looking at share markets in Asia from Friday’s session with mainland Chinese share markets lifted very strongly on stimulus innuendo with the Shanghai Composite up more than 1.8% higher at 3275 points while in Hong Kong the Hang Seng Index has closed more than 1.4% higher to 19916 points.
The daily chart is now 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 as speculation more stimulus is on its way from the PBOC today:
Japanese stock markets however pulled back following the BOJ meeting with the Nikkei 225 closing 0.4% lower at 32759 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 retraced from overbought to slightly negative settings with this retracement down to the support zone possibly not yet over, as we watch for a possible breakout on any weakening Yen trend:
Australian stocks also had a major pullback as the latest retail sales print disappointed, with the ASX200 closing 0.7% lower at 7404 points.
SPI futures however are up nearly 0.3% on the lift on Wall Street Friday night, as it still looks like that the 7300 point level has firmed as short term support instead of resistance. Medium term price action is slowly getting out of its downtrend with the daily chart showing a breakout here as the June highs are bested:
European markets continued to lift across the continent with the Eurostoxx 50 Index up more than 0.4% as it still pushes aside resistance at the 4400 point level, closing at 4466 points but did retreat in post close futures alongside Wall Street.
The daily chart showed this potential bull trap building even though weekly support at 4200 points had been continually defended, with weekly resistance at the 4350 points level the actual area to beat. Support has been broadly defended at 4200 points, touched three times now in as many months but the 4400 point resistance level is now broken:
Wall Street was also able to follow through with all three bourses lifting, the NASDAQ gaining nearly 2% while the S&P500 finished up nearly 1% higher at 4582 points.
The daily chart continues to show a good uptrend that got a little out of hand recent with a welcome consolidation, now pushing towards the 4600 point zone following the Fed’s latest meeting. This week’s NFP print could unsettle the trend so watch for support and a potential short term retracement below the 4550 area:
Currency markets dumped Euro quickly after the mid week ECB meeting and then USD firmed again on the latest US GDP print and Core PCE figures even as the latter was slightly below expectations. USD is likely to push aside all the major currencies until Friday’s NFP print.
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 was suggesting a bearish engulfing downside move heading into Friday’s BOJ meeting but after some oscillation, Yen sold off and Friday night saw the pair return to its Monday starting point just above the 141 handle.
Four hourly momentum has switched back again to the positive side although its hard to discern real levels of ATR support and resistance until price action settles down here. I’m watching the 141 level to hold after the weekend gap as a sign of more potential upside:
The Australian dollar was pushed decisively down on ECB dovishness and then again on the US GDP print, keeping the Pacific Peso depressed below the 67 handle and breaking all support levels, where its likely to remain throughout this trading week.
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 are holding on to their recent swift gains with Brent crude lifting again on Friday night, pushing through the $84USD per barrel level to maintain a three month high.
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 had been finding new life after only recently threatening to rollover through the $1900USD per ounce level, but the recent attempt at pushing up through the $1980 level has been thwarted in one fell swoop, sending the shiny metal back down to the $1940 level on USD strength, with some of that recovered on Friday night.
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:
