It was all about the TACO trade overnight as Wall Street rallied on an extension of Chinese tariff pauses despite a lot of vitriol between Trump and the Middle Kingdom about breaking the recent trade deal. Meanwhile the Trump regime is still waiting on “best offers” from other nations with a new Wednesday deadline which I’m sure will be respected. The USD fell across the board as a result, mostly against Euro, Kiwi and the Australian dollar which almost hit the 65 cent level.
Oil prices have started the week with a surge despite a lift in OPEC production with Brent crude now well above the $65USD per barrel level while gold was able to make further gains on its Friday fightback as it almost reached the $3400USD per ounce level overnight.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were closed for a holiday while the Hang Seng Index slumped some 1.6% before recovering to lose only 0.5% to just keep above the 23000 point level.
The daily chart shows a near complete fill of the March/April selloff although momentum is now picking up again and remains slightly overbought as the 90 day “relief” continues without any further positive news. Watch for any crack below the low moving average or 23000 point level:
Japanese stock markets were also on the backfoot with the Nikkei 225 down 1.3% to 37470 points.
Daily price action was looking very keen indeed although daily momentum has slowed down somewhat this week after clearing resistance at the 36000 point level with another equity market that looks stretched and ready to rollover again here. Watch ATR support closely which appears to be firming in recent sessions:
Australian stocks were unable to stand above the rest of the region and had a mild setback with the ASX200 closing 0.2% lower at 8414 points.
SPI futures are up strongly on the surge on Wall Street overnight. The daily chart pattern is still suggesting further upside is still possible as the inverted head and shoulders pattern is nearly complete with the RBA cut helping boost this but correlation with other risk markets will come into play here – watch as daily momentum is firming again:
European markets failed to continue their rebounds with even the German DAX pulling back slightly as the Eurostoxx 50 Index finished nearly 0.2% lower at 5355 points.
Support at the previous monthly support levels (black line) at 5100 points is now firmly held with the bounce off the 2024 lows at the 4400 point level indicating a massive fill of this dump and pump action with the former February highs nearly complete. A rollover could be forming here so watch for support at the 5200 point level proper:
Wall Street had a much more robust session with gains across the board as the NASDAQ lifted nearly 0.7% higher while the S&P500 finished up 0.4% to close at 5935 points.
The four hourly chart was previously supporting a potential slowdown action here that could be translating to a top on the daily chart as prices try to get back above the pre-Trump Tariff Tax day. This is again looking like a TACO trade as resistance seems weak overhead:
Currency markets continue to move against King Dollar as the tariffs imbroglio rears its head again with Euro pushed back above the 1.14 level after briefly breaking into the low 1.12 zone last week, now making a new weekly high.
The union currency was pushed back below the 1.13 handle previously but support bounced back at the 2023 and 2024 highs with a breakout above trailing ATR resistance on the four hourly chart. Medium term momentum remains very positive here:
The USDJPY pair rebounded most of last week but then got way ahead of itself before a solid 200 pip retracement that saw it move back to the 144 handle and then below that level on Friday night, continuing this downtrend overnight.
I still contend we need to watch for any sustained break below the 139 level which completes a multi year bearish head and shoulders setup that could see the 110 to 120 level revisited. Watch the short term support that could come under pressure here first:
The Australian dollar had been pushed down on USD resurgence after blasting through the 65 cent level previously but managed a small reprieve on Friday night that is no longer weighed down by short term resistance at the mid 64 cent level as it almost crossed back into the 65 handle overnight.
Stepping back for a longer point of view (and looking at the trusty AUDNZD weekly cross) price action has remained supported by the 200 day MA (moving black line) after bouncing off a near new five year low. Keep an eye on temporary support at the 63 cent level:
Oil markets are still trying hard to get back on track and the latest OPEC production boost should have seen a fall but instead prices rallied overnight with Brent crude pushed back above the $65USD 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 lower action for the latter half of 2024. The potential for a return to the 2024 lows is still building here as domestic demand in the US is likely to continue to decline as the Trump Taxes take effect but watch for any breakout above the $66-67 zone:
Gold had briefly retraced below the $3300USD per ounce level after deflating all week but managed like the other undollars to find some stability on Friday night, and extended that into a small rally overnight to almost cross the $3400 level.
Short term support had firmed immensely in recent sessions showing real strength but momentum became considerably overbought so this was inevitable as price action has reverted back to the uptrend line from the April lows. This line appears broken and we could be seeing a more sustained breakout building on USD weakness:
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!