An unsettled risk complex overnight in the absence of economic events but looking through to tonight’s all-important US CPI print and probably just as volatile Presidential debate. Oil prices slumped to a three year low while Wall Street pressed forward with its rebound, albeit only led by tech stocks. European markets failed to follow through on their own rebound and futures for Asian equities look mixed at best. The USD remains strong against all but Yen, with the Australian dollar remaining in a very weak position as it just can’t get back above the 67 cent level.
10 year Treasury yields moved lower, falling 5 points to the 3.65% level while oil prices slumped as Brent crude closed below the $70USD per barrel level for the first time since 2021. Gold fought back against expectations again and was able to extend above the $2500USD per ounce zone.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were down initially but recovered going into the close with the Shanghai Composite up 0.3% while the Hang Seng Index finished up nearly 0.3% to 17234 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 just can’t clear short term resistance:
Japanese stock markets meanwhile are still treading water with the Nikkei 225 closing 0.2% lower to 36159 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. Yen volatility is coming back so a sustained return above the 38000 point level from May/June just doesn’t seem possible. Futures indicate a staid start however as there is not enough to build positive momentum for the week:
Australian stocks were the most positive in the region with the ASX200 closing some 0.3% higher to get back above the 8000 point level at 8011 points.
SPI futures are up only marginally despite the solid boost on Wall Street overnight. Short term momentum and the daily chart pattern was potentially signalling a top here and this combination could still eventuate, as support at or just below the 8000 point level remains key to filling this gap:
European markets returned swiftly to their negative mood of late with some solid losses across the continent as the Eurostoxx 50 Index closed 0.6% lower to 4747 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 had previously cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum has gone into full reverse turning this pullback into a selloff:
Wall Street rebounded again but lost momentum later in the session with tech stocks the only ones leading the way as the NASDAQ gained 0.8% while the S&P500 lifted 0.4% to close at 5495 points.
The four hourly chart illustrates how the inability to clear the 5600 point level in mid August and even match the July highs is setting up for a significant retracement that could end up at the 5100 point level as the Fed punchbowl is taken away. In the short term, momentum was not extremely oversold so it could bounceback further here to the 5500 point level before tonight’s CPI print:
Currency markets remain in the thrall of a strong USD as we all anticipate tonight’s US CPI print as King Dollar yet again firmed against almost all the majors. Euro has fallen below the previous weekly lows to settle almost on the 1.10 handle overnight.
The union currency had been structurally supportive despite the start of week extended dip that reversed on built in expectations of this soft jobs print, with those expectations dashed and then some on the night! Watch now for a potential follow through below the 1.10 handle as momentum remains quite oversold in the short term:
The USDJPY was able to stabilise somewhat following its on Friday night with some intrasession volatility but this has turned into another slump yesterday with a near 90 pip move down to well below the 143 level.
Momentum was suggesting a possible bottom was brewing as the BOJ wants to get this volatility under control, but this retracement is lasting longer than expected:
The Australian dollar fell out of bed after last Friday’s NFP print, making a new monthly low in the process and has ben unable to climb out of its very weak position to remain well below the 67 handle overnight
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. There is potential to fall further here as the series of lower highs on the four hourly chart shows a lack of buying going into tonight’s US CPI print:
Oil markets remain in sell mode amid OPEC’s warning with Brent crude sliding below the $70USD per barrel level to a new three year low.
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 remaining in negative territory, setting up for this sharp retracement and continued selloff:
Gold was able to extend its nascent gains above the $2500USD per ounce level overnight but short term momentum is still only marginally positive with the weight of the stronger USD still weighing on the safe haven.
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 and is likely to be the anchor point for this week’s price action. Momentum is picking up but the series of lower highs on the four hourly chart needs a significant breakthrough soon:
Glossary of Acronyms and Technical Analysis Terms:
ATR: Average True Range – measures the degree of price volatility averaged over a time period
ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility
CCI: Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)
Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement
FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)
DOE: US Department of Energy
Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out/wrong on your position, so cry uncle and get out!