A sharp reversal on USD/JPY last week brings a potential break above 150 in to focus, assuming the US dollar can find a bid and USD/CNH continues to hold above its 200-day MA. Meanwhile, crude oil has handed back all of its 2023 gains and it is a very fine line before the bias for a move to $80 becomes invalidated.
By :Matt Simpson, Market Analyst
Market Summary:
- Wall Street rallied for a fourth week, although upside momentum was waning near cycle highs for US indices during the shortened Thanksgiving week
- Trading volume are expected to pick up again for US markets as traders return to their desks after the long weekend, although we’re now approaching month end which can also lead to some erratic price action. With that said, the Monday following Thanksgiving has averaged negative returns for the S&P 500 and Nasdaq 100.
- The US dollar was the weakest forex major last week as traders remained convinced that the Fed may be forced to cut rates sooner and that no more hikes were coming this cycle
- Keep in mind that the US dollar tends to post positive returns on the Monday and Tuesday following Thanksgiving.
- Traders will keep a close eye on bond auctions this week to see if demand for them will increase for a second week and further suppress yields to boost appetite for risk
- The weaker US dollar helped AUD/USD close at a 15-week high and is on track for a decisive bullish engulfing month. However, it has found resistance around its 200-day MA – just below beneath the 66c handle, so I currently have a neutral view on the Aussie until further notice
- Gold prices didn’t break below 1985 to trigger my near-term pullback bias, instead opting to close just above $2000 on Friday
- Yet until we see a break above the cycle highs around $2,000, the potential for a pullback remains on the table in my view
Events in focus (AEDT):
- 12:30 – China
- 00:00 – US building permits
- 02:00 – US home sales
ASX 200 at a glance:
- The ASX 200 formed a very small bearish pinbar / inside week to show a hesitancy to commit in either direction
- However, a lower high formed on Wednesday beneath a bearish trendline from the August high, which keeps the potential of another leg lower on the table
- SPI futures rose 0.2% on Friday so the cash market is expected to hope slightly higher today
- A break beneath last week’s low brings 7,000 into focus for bears
USD/JPY technical analysis (chart):
After USD/JPY fell over -3% in six days yet formed a bullish pinbar at a key support level, momentum has turned higher. In fact a 3-day bullish reversal pattern called a Morning star formed on the daily chart, although volatility dropped on Thursday and Friday over Thanksgiving. Yet this lower period of volatility could be construed as bulls taking a breather ahead of their next attack. The trouble now is that we have the 150 handle nearby which might initially provide resistance. One approach for bulls to consider is to see if prices can retrace towards 148.80 and seek to enter in anticipation of a break above 150, to increase the potential rewards to risk ratio. However, if we see bearish volatility return around 150 then it could indicate an important swing high and the ‘C’ wave an on ‘ABE’ correction from the 151.90 high has begun.
Crude oil technical analysis (chart):
I outlined a bias for crude oil to bounce towards $80, but as we can see that has not exactly happened yet. However, prices did hold above the $75 – 2023 open price zone, so if oil can retain that level of support today then perhaps it still stands a chance. What I don’t like is how prices turned lower in the final two hours of trade in Friday to this support level, so I’m prepared for a gap lower today and break of the Thursday pinbar low to invalidate the near-term long bias. However, if prices can hold support today and break above $77 – perhaps a move to $80 (or even $82) can be achieved ahead of its next leg lower.
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– Written by Matt Simpson
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