Another round of Trump Tariffs overnight saw risk markets largely shake off the volatility even though the EU is gearing up to be next in sight as the global trade war heats up. Wall Street bounced back after watching the Superb Owl and absorbing the slightly weaker than expected jobs print on Friday night with European shares re-engaging to the upside again ignoring the likely incoming tariffs. The Australian dollar is back to the mid 62 cent level and in somewhat of a stronger position as traders weigh up next week’s long awaited RBA meeting.
10 year Treasury yields moved higher again to above 4.5% level while trading in oil saw both markers jump slightly higher as Brent crude finished above the $76USD per barrel level for the first time in over a week. Gold finally pushed through to a new record high above the $2900USD per ounce level.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets have continued their strong bounceback with the Shanghai Composite now above the 3300 point level while the Hang Seng Index also made up lost ground, closing 1.6% higher to 21484 points.
The Hang Seng Index daily chart shows how resistance formed around the 21000 point level with only one false breakout in late November squashed back to the 20000 point level where price action has stayed since. This was setting up for another potential breakdown here as price oscillated downward but has turned into an impressive bounce and looks like continuing as markets reopened after the NY break with the previous monthly highs at the 21500 point level the target to beat:
Japanese stock markets however were somewhat steady with the Nikkei 225 finishing just 0.1% higher at 38857 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 remains a problem here, with a sustained return above the 38000 point level from May/June no longer on the cards as resistance is firming. Watch for a potential breakdown below the 38000 point level:
Australian stocks were the worst in the region on the back of the steel and aluminum tariffs with the ASX200 closing 0.4% lower at 8482 points.
SPI futures however are up 0.4% on the rebound on Wall Street overnight. The daily chart pattern and short price action suggests resistance overhead at the 8300 point level is starting to weigh on the market with a big push through required soon to get back to the 2024 highs. I’m a bit concerned about those negative candlesticks going into the RBA meeting too:
European markets did a lot better than expected with steady moves higher across most of the continent as the Eurostoxx 50 Index lifted more than 0.6% to close at 5358 points.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance unable to breach the 5000 point barrier in recent months. Price had previously cleared the 4700 local resistance level as it seeks to return to the previous highs as momentum picks up strongly here with the 5000 point level turning into very strong support:
Wall Street finally put some runs on the board with tech stocks leading the way as the NASDAQ lifted more than 0.8% while the S&P500 gained some 0.6% to extend beyond the 6000 point level at 6066 points.
Price action had all the trademarks of a continuation below the 6000 point support level as the potential to overshoot and overreact to the FOMC meeting going into the NFP print tonight is building. This should have set up a rally into the 6200 point area but could the first stage of a pump and dump scheme although overhead resistance is weakening:
Currency markets essentially tried to move to a stronger USD as a result of the steady as she goes NFP print on Friday night but it still hasn’t been felt across the board. Euro had one of the bigger reversions as its fell back to the 1.03 handle after failing to push above overhead resistance at the 1.045 level mid week and stayed there overnight.
The union currency deflated all week before the previous Friday night slam dunk into the mid 1.03 area on the tariff troubles as daily momentum remained to the downside. Short and medium term support is still under threat here and requires a significant move higher or we could see a return to the 1.02 level:
The USDJPY pair is still in a funk with Yen remaining quite strong again overnight as it stays below the 152 level in the wake of the US jobs print.
Short term momentum was extremely oversold before the start of week bounce but requires price action to at least get over the 156 level to call this a proper trend higher for USD and this hasn’t come to pass as USD weakens structurally overall and domestic policies continue to strengthen Yen:
The Australian dollar should be one of the biggest casualties of the trade war as the Pacific Peso gapped down to the 60 handle recently but has now steadied very strongly back at its previous weekly highs to form a solid bottom pattern, with this strength showing through without a major drop on Friday night.
The recent follow through to the high 62’s and low 63’s was always high risk going into the live February RBA rate meeting and after the Trumpian tariff crusade so watch for a rejection of medium term support at the mid 61 cent level although this bounceback could shot over the 200 day MA (moving black line):
Oil markets are now in flux due to the energy war with China but overnight saw some selling exhaustion set in as both WTI and Brent crude had small bouncebacks, the latter finishing above the $76USD per barrel level.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways action for the latter half of 2024. The potential for a new rally to form above the $77USD per barrel level from here is dwindling as recessionary fears mount:
Gold however wants to continue its surge above the $2800USD per ounce level and is now accelerating above the next “handle” at $2900 overnight although its looking well over extending in this current run.
Price action had been accelerating in confidence in early December as new levels of support were being created regardless of USD strength but this pullback and rebound both had been fighting too much under the $2700 zone so I have been skeptical of any upside potential. However this is looking more interesting as the previous weekly high is now surpassed although momentum is quite overbought:
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!