The US dollar held a key support level on Thursday, which could provide the platform for a bounce today if all goes well. Crude oil continues to hint at its own potential bounce, whilst the ASX 200 appears to have formed a swing high on the daily chart.
By :Matt Simpson, Market Analyst
Market Summary:
- Volatility was typically low on Thursday with the US celebrating Thanksgiving, which resulted in the usual tight ranges on low trading volumes
- Japan was also on a public holiday, although traders return to their desks today – just in time for a key inflation report this morning
- USD/JPY was flat for the day and traded within the upper range of Wednesday’s bullish day, although 150 is the clear level for bulls to conquer nearby
- The US dollar index closed back above its 200-day average for a second day, after forming a 3-day bullish reversal pattern. If the dollar index sticks to its seasonal tendency, it has a higher probability of trading higher over the next two days after thanksgiving
- ECB policy makers are cautiously optimistic that inflation is falling faster than expected, although they further hikes remain an option should they be necessary according to the latest ECB minutes
- The US dollar may not have followed its seasonal tendency of rising on Thanksgiving day, but it did hold above its 200-day average following a 3-day bullish reversal pattern.
- Take note that the Friday (today) and Monday following Thanksgiving have provided positive average and median returns for the US dollar. If the US dollar can hold above its 200-day average today, my bias is for a near-term bounce ahead of its next leg lower
US dollar index technical analysis (daily chart):
With the US dollar holding above its 200-day average, I see the potential for a bounce as long as it continues to hold above it. A move to the highs around 104.50 seems achievable which could take the wind out of the sale for EUR/USD, GBP/USD, AUD/USD and the like. At which point I’d then be looking for evidence of a swing high ahead of the dollar’s next leg lower.
Events in focus (AEDT):
- 10:30 – Japanese CPI
- 10:50 – Japan’s foreign investment in bonds and stocks
- 11:30 – Japan’s PMIs
- 18:00 – German GDP
- 20:00 – ECB’s Christine Lagarde speaks
- 00:30 – Canadian retail sales, manufacturing sales
- 01:45 – US manufacturing, services and composite PMI (S&P global)
ASX 200 at a glance:
Crude oil technical analysis (daily chart):
Prices fell an impressive -25% since the September high, although the technical bear-market fall didn’t quite reach the lower $70 target. A false break of $75 has also since seen a potential higher low in form of a bullish hammer on the daily chart, so I suspect crude oil will now try and reach for $80 at a minimum – a break above which opens up a deeper bounce to $82 / the Jan and April highs.
Gold technical analysis (daily chart):
Softer yields and the dollar have been a clear benefit for gold prices, all thanks to softer US economic data that has brought forward the case for the Fed’s first cut in 2024. The move lower in the US dollar looks overextended, and the seasonal pattern for the US dollar index is to weaken into Thanksgiving and strengthen in the days following it. And with an effective 4-day weekend looming in the US, gold currently lacks the legs to commit fully above $2000.
A small bearish inside day formed just beneath the key level of $2000 to bring a double top into the mix. I wouldn’t want to be long at these levels, and a break beneath $1985 brings a countertrend move into the mix. Quite how deep a pullback may become is down to how far the US dollar can bounce – or if it does at all. But a move to $1960 seems feasible, at which point bulls could seek evidence of a swing low to seek bullish setups in anticipation of a break above $2000.
ASX 200 technical analysis (daily chart):
It appears that the rally on the ASX 200 has ran out of steam, and bears are returning to the table. Bulls have failed to retain control since the ASX reached my 7100 target, and momentum has turned lower. A small bearish doji formed on Wednesday which also marked a lower high and Thursday’s range opened at the high of the day and closed at the low. Given the lower high respected trend resistance from the August high, I suspect the path of least resistance over the near-term is lower.
Bears could seek to fade into minor rallies beneath 7060 for an initial move to 7,000 – a break beneath which brings the 6950 lows into focus.
Crude oil technical analysis (1-hour chart):
I outlined a bullish bias for crude oil yesterday, based on a bullish daily hammer that also formed a higher low on high volume and trapped bears with a false break of $70. Whilst we’re yet to see a convincing bullish follow through, it is worth noting that Wednesday’s price action held above the $75 handle and 2023 open price.
The 1-hour chart shows that prices rebound from $74 yesterday and much of the volume was seen around this key level, once again indicating that bears are trapped and there is demand around that key level. With prices now trying to establish support around the weekly pivot point, I’m looking for a break above $77 to confirm its next leg higher towards $80, near the weekly R1 pivot. Q2 open and round number.
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– Written by Matt Simpson
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