Wall Street couldn’t get a leg up overnight as the soft Microsoft (NASDAQ:MSFT) earnings pulled the NASDAQ back while currency markets remain in the thrall of King Dollar as speculation the Bank of Japan will hike in today’s meeting saw Yen zoom higher alone amid the major currency pairs. European shares saw a small reprieve amid the latest German inflation and GDP prints while Euro remains very weak and the Australian dollar dead flat as traders anticipate today’s inflation data.
US Treasuries saw small yields drop all across the curve with the 10 year down 4 points to push further below the 4.2% level while oil prices dropped again after their poor start to the trading week as Brent crude finished below the $79USD per barrel level for a new monthly low. Meanwhile gold prices rebounded more than $25 to get back above the $2400USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are really struggling with the Shanghai Composite falling at the open and closing more than 0.4% lower while the Hang Seng Index is about to break the 17000 point barrier, falling more than 1.3% to close at 17002 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 looked like turning this falling wedge pattern into something more bullish but is still looking like a dead cat bounce instead:
Meanwhile Japanese stock markets are trying to hold off the sour mood with the Nikkei 225 up slightly to close at 38525 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 was broken on this retracement, with futures indicating another pullback in line with Wall Street so this could be a tough road to climb back:
Australian stocks stumbled around given the poor lead from Wall Street the previous session with the ASX200 closing 0.4% lower to 7952 points.
SPI futures are up 0.3% but I think we could be in for a mixed finish at best given the falls on Wall Street overnight and today’s inflation print. 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 in mid April. Momentum has retraced fully from being overbought so this could be a false breakout that spreads into a proper rout:
European markets are again trying to get traction with a somewhat solid session overnight across the continent, led by German stocks as the Eurostoxx 50 Index closed 0.5% higher to 4841 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 still looming at the 5000 point barrier. Former ATR support at the 4900 point level remains the anchor point but as I said I was wary of this one off move and it looks like another downtrend:
Wall Street was again initially bullish but poor tech earnings saw the NASDAQ lose more than 1% while the S&P500 was dragged down some 0.5% lower to 5436 points.
The four hourly chart showed resistance overhead that had been tested last Friday before an early week slump that has now been tested and broken through, helped alongside a previously soaring NASDAQ. Momentum was somewhat oversold but has not yet returned to positive settings and and weekly support levels are still being threatened here:
Currency markets are starting to moderate in volatility with all eyes on the upcoming central bank meetings as the USD firmed overnight against almost everything. Euro pushed further below the 1.09 handle as it tries to find a bottom at the 1.08 level but is looking weaker following the German inflation figures.
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 is too much pressure here from King Dollar so watch for a further retracement as ATR support at the mid 1.08 handle has been taken out:
The USDJPY short term chart still looks like tumbling down a series of steps here as Yen firmed overnight due to the possibility of today’s BOJ meeting turning into a small rate hike, as the pair flomped back to the 152 level.
This volatility speaks volumes as it once pushed aside the 158 level as longer term resistance, but then was unable to breach the 162 level as it looks like the BOJ intervention finally worked on the ever weakening Yen. With this short term bounce failing to get past short term resistance, more steps down are inevitable:
The Australian dollar continued to struggle and finished flat later in the session to remain just above the 65 handle as the tumbling iron ore price continues to take a toll.
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 looks dire with medium term support now broken with today’s inflation print a key catalyst to watch out for:
Oil markets are failing to stabilise after have a solid run in the latter half of June with Brent crude’s breakdown on Friday night extending further, this time closing below the $79USD per barrel level 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 has now been broken with short term momentum now retracing into negative mode – watch out below:
Gold is trying to get back on track with another rebound overnight that finally had to break through the $2400USD per ounce level.
While it was the biggest casualty of the reaction to the US jobs report, the shiny metal was able to clock up some gains before this reversal, almost hitting the $2500USD per ounce level. The longer term support at the $2300 level remains key but that broken downtrend line from mid July looks like a good opportunity:
