Wall Street rallied again overnight on the prospect of a potential US-China trade deal while also supported by the Fed punch bowl where everyone expects one rate cut this week. The USD pulled back against some of the majors, stabilising against the burgeoning Canadian Loonie while Euro drifted higher, as the Australian dollar stood out with a significant breakout above the 65 cent level. Gold broke down below the $4000USD per ounce level while oil prices also moderated.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets lifted strongly into the close with the Shanghai Composite almost breaking the 4000 point barrier while the Hang Seng Index was up 1% to 26433 points.
The daily chart showed a complete fill of the March/April selloff and then some with a breakout above the 26000 point level looking like a sustained move here before the most recent Trump tantrum. The possible trade deal is seeing a resumption of buying here above 26000 points again:
Japanese stock markets are rebounding the strongest with the Nikkei 225 up more than 2% to break the 50000 point level.
Daily price action was looking extremely keen indeed as daily momentum accelerated after clearing resistance at the 42000 point level with another equity market that looks very stretched and breaking out a bit too strongly here. ATR support has been ratcheting up for awhile as the 50000 point level is now broken for an extended rally:
Australian stocks were the worst performers but the ASX200 actually managed a solid finish, some 0.4% higher at 9054 points. SPI futures however are looking to take back those gains despite a lift on Wall Street overnight.
The daily chart pattern was suggesting further upside still possible with a base built above the 8700 point level as daily momentum tried to maintain its overbought status. Short term support is holding on, supporting a wider rally, but the momentum is not yet there:
European markets were able to find some confidence across the continent as the Eurostoxx 50 Index eventually closed 0.6% higher to 5711 points.
Weekly support has been respected after a brief touch below the 5200 point level as the recent rebound on Euro weakness shows a complete fill. However the market was looking to make some good headway here despite the too high valuations (mainly defense stocks) with more upside potential building:
Wall Street continued its surge with tech stocks leading the way again as the NASDAQ gained nearly 2% while the S&P500 lifted just over 1.2% closing at the 6875 point level.
The daily chart still looks like a stairway to heaven as all doors are open to this burgeoning AI and corporatist-fascist bubble as the latest CPI print proves tariffs are having little impact on inflation – so more interest rate cuts to blowoff asset prices are coming!
Currency markets are still trying to swing away from recent USD strength in the wake of Friday’s US CPI print with Euro lifting slightly further above the 1.16 handle overnight. Meanwhile the Canadian Loonie and Pound Sterling are stabilising.
The union currency had been building strength prior to the recent bad domestic economic news from the US overshadowed any continental slowdown but had reversed that trend in recent weeks. The potential breakout above the 1.17 level is getting more traction however momentum is slowing down somewhat:
The USDJPY pair has wiped out all of its previous losses and then some with a rally last week easing into consolidation as we start the new trading week with price pulling back slightly below the 153 level.
The previous price action was sending the pair beyond the March highs and had the potential to extend those gains through to start of year position at the 158 handle but the recent internal political volatility that looks resolved could see some steady trends build from here, but watch for any waning in overbought momentum readings:
The Australian dollar had been under strain recently with the latest numberwang figures last week suggesting a potential November rate cut from the RBA but the prospect of more China positivity is pushing the Pacific Peso well above the 65 handle although it hasn’t extended further overnight.
This could become a more sustained breakdown if the China/US trade war heats up as I’ve opined that the Pacific Peso is not out of trouble although I’m wary of a lot of volatility here, but a short term double bottom pattern has been formed strongly on the four hourly and daily chart:
Oil markets have been failing to get any positive momentum going as both WTI and Brent crude remaining depressed but this have reversed due to the recent surprise drawdown in US oil supplies and the ongoing attacks on Ruzzian refineries amid further sanctions. This gave both markers a big lift higher last week with Brent continuing to push above the $65USD per barrel level.
The daily chart pattern shows the post New Year rally has a distant memory with any potential for a rally up to the $80 level completely dissipating. There was potential here for a run down to the $60 level next but wait and see if this one off bid turns into a trend:
Gold is failing to stabilise after a well needed correction down towards the $4000USD per ounce level recently, with a breakdown overnight seeing it breach that level and close around the $3980 zone in a swift selloff
This was looking very solid indeed as more central banks indicate more gold purchases and to be frank, confidence in the USD continues to crash but be wary of more downside volatility ahead this week. I noted a short term potential double top pattern forming here on the four hourly chart and these falls could extend well below the $4000 level but watch for some knife catching buying here:
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!