200-day moving average

Market picture The crypto market has climbed 2% in the last 24 hours to 1.04 trillion. It took a continuation of the Nasdaq rally and a dollar weakening by more than 1% from its intraday high to revive demand here. Demand also came after Tether's USD peg was restored, although the exchange rate was still 0.1% lower than 7 and 30 days ago. The cryptocurrency's fear and greed index rose from 41 to 47, back into neutral territory. As expected, bitcoin found support on the dip below $25,000, leaning on external positivity and short-term oversold conditions. However, the move is still in a downtrend and will remain so until the price breaks above previous local highs - now at $27.3K. Targets for the current downtrend stay in the $23.6K area. Ethereum has exhausted most of its corrective potential, as it has breached the 200-day moving average at $1630 and briefly touched oversold territory on the daily RSI.     Tether's USDT stablecoin has moved away from parity with the US dollar. The coin's weighted average exchange rate fell to 0.9958, according to CoinMarketCap. "The markets are nervous these days, so it's easy for attackers to take advantage of the general sentiment. We at Tether are as ready as ever," said Tether CTO Paolo Ardoino.     News background Investment giant BlackRock is preparing to file for a Bitcoin ETF. The US Securities and Exchange Commission (SEC) has previously rejected almost all applications to register cryptocurrency ETFs. Apple has rejected a new version of its non-custodial Zeus wallet app for the Lightning Network on the App Store. Cryptocurrency broker Floating Point Group (FPG), which has $50 billion in assets under management, reported a hack and halted trading, deposits and withdrawals. Damage is tentatively estimated at $15-20 million. The total number of subscribers to Reddit's leading cryptocurrency communities, r/Bitcoin and r/Ethereum, reached a new record high of 7 million users. More than 364 thousand people subscribed to the BTC section between 4 and 11 June. The SEC's litigation with two major cryptocurrency exchanges has likely piqued the community's interest.  

Market picture Crypto market capitalisation rose 0.8% to $1.073 trillion, close to its level of 10 days ago. Bitcoin was a major contributor to the rally, rising 1.6% to $28.8K, while Ethereum gained just 0.4% to $1730. Among the top altcoins, Solana (+3.5%) stands out, with other altcoins ranging from -1.2% (XRP) to +1.6% (Polygon). For the fifth day out of the last six, Bitcoin has breached the upper boundary of its bearish range and tested the 50-day moving average near $27K. Although the price has now breached the channel's upper boundary, a break of the downtrend cannot be declared until a close above $27.2K, the previous local high, is achieved. A reversal from current levels offers a downside of more than 10% with the potential for a drop to the 200-day moving average. According to CoinShares, investment in crypto funds fell by a paltry $5 million last week, but net outflows continued for the ninth consecutive week. Retail traders helped push Bitcoin above $26K, according to Glassnode, which noted an increase in activity from addresses controlling between 0.1 and 1 BTC.     News background MicroStrategy founder Michael Saylor said that recent SEC actions against crypto have made it clear to the industry that it is doomed to be bitcoin-centric. According to him, BTC is the only institutional-level asset. US crypto payments company Wyre announced it was shutting down after a decade of operation due to difficult bear market conditions. After fintech company Bolt terminated a $1.5bn acquisition agreement in September 2022, the platform was on the brink of bankruptcy. Ethereum developers discussed details of a future update to the Deneb consensus level during a conference call that will be part of Dencun hard fork. The minimum balance for ETH network validators is proposed to be increased from 32 ETH to 2048 ETH, attempting to improve blockchain efficiency. The International Monetary Fund (IMF) is working on a global infrastructure for central bank digital currencies (CBDCs) and legislation to control the movement of funds in CBDCs, said IMF chief Kristalina Georgieva.

Hang Seng Index has dropped by -2.4% since last Friday’s high ex-post interest rate cuts by PBoC. Short-term uptrend from 31 May 2023 low remains intact as it still trades above the 200-day moving average. Key support to watch will be at 19,090.   This is a following-up analysis of our earlier publication, “Hang Seng Index Technical: Potential breakout from channel resistance” dated on 9 June 2023 (click here for a recap). The Hong Kong 33 Index (a proxy for the Hang Seng Index futures) has staged the expected bullish breakout and almost met the first resistance of 20,300 as it rallied by +5% from 9 June to an intraday high of 20,205 last Friday, 16 June in light of a shift in the China central bank, PBoC conservative targeted monetary policy stance to a more accommodating approach as it cut 3 key interest rates within two weeks; 7-day reverse repos, 1-year medium-term lending facility, and the 1-year & 5-year loan prime rates today, 20 June that are being used to price corporates/consumer loans and mortgages respectively. Since Monday, 19 June, the Index has tumbled by -2.4% which seems to have fallen victim to the “buy the rumours, sell on the actual news release” mantra as today’s cut on the loan prime rates have been almost fully priced in.      

Fig 1: Hong Kong 33 minor short-term trend as of 20 Jun 2023 (Source: TradingView, click to enlarge chart)   The current drop in price actions is now coming close to a key pull-back support area The Index is now hovering right above the former descending channel resistance and now turns pull-back support at 19,440 and the 200-day moving average coming in as support at around 19,090. Also, the 19,440/19,090 support area confluences with 38.2% and 50% Fibonacci retracement of the minor short-term uptrend phase from the 31 May 2023 low to the 16 June 2023 high.   The momentum indicator is also at a parallel/corresponding support The 4-hour RSI oscillator, a momentum indicator has exited from its overbought area, and it has now reached a corresponding support zone of 42%/36% which may lead to a potential positive reversal in price actions. 19.090 key short-term pivotal support to maintain the minor short-term uptrend phase with intermediate resistances coming in at 20,300 and 20,900. On the other hand, a break below 19,090 negates the bullish tone to expose the 18,130/17,630 key medium-term support.

Dow Jones Industrial Average has underperformed against the S&P 500 and Nasdaq 100 in the past 2 sessions. Broke minor support yesterday now turns into key short-term resistance at 34,310. Sill sandwiched within a complex sideways range configuration in the medium-term horizon with its range resistance at 34,630.   The Dow Jones Industrial Average (DJIA) has continued to be one of the underperformers among the major US benchmark stock indices ex-post Q2 “Triple Witching” options expiration since last Friday, 16 June. In the past two sessions, the DJIA has declined by -1.03% versus the S&P 500 (-0.84%), Nasdaq 100 (-0.76%), and small-cap concentrated Russell 2000 (-1.2%).   Sandwiched within a medium-term complex sideways range in the past 6 months   Fig 1:  US Wall St 30 medium-term trend as of 21 Jun 2023 (Source: TradingView, click to enlarge chart) The price actions of the US Wall St 30 Index (proxy of the Dow Jones Industrial Average futures) have continued to churn within a medium-term complex sideways range configuration in place since 13 December 2022. The recent minor up move from the 25 May 2023 low of 32,561 has managed to stage a retreat right below the upper boundary of the range configuration now acting as resistance at 34,630 (see daily chart).   Minor support broke but still above the 200-day moving average     Fig 2:  US Wall St 30 minor short-term trend as of 21 Jun 2023 (Source: TradingView, click to enlarge chart)   Yesterday, the Index has broken below its minor ascending trendline support from the 1 June 2023 low now acting as a pull-back resistance at around 34,310 which also confluences with the 61.8% Fibonacci retracement of the current minor decline from the 16 June 2023 high to yesterday, 20 June 2023 low (see 1-hour chart) Short-term momentum is still showing no clear signs of a bullish reversal as indicated by the 1-hour RSI oscillator that is still below a corresponding resistance at the 49% level. A break below the 33,830 near-term support exposes the next support at 33,470 (minor swing low area of 7 June 2023 & close to the 50% Fibonacci retracement of the prior up move from 25 May 2023 low to 16 June 2023 high). On the flip side, a clearance above 34,310 key short-term pivotal resistance negates the bearish tone for the next resistance to come in at 34,630 (medium-term range top as illustrated on the daily chart).

US-China geopolitical tension remains on heat after the latest China exports curb on key metals for semiconductor chip production. China’s proxy stock market; Hang Seng benchmark stock indices rallied to a 5-day high. RBA left its policy cash rate unchanged at 4.10%, a pause after two consecutive interest rate hikes but hinted in its monetary policy statement is tilted towards a hawkish pause. Actions speak louder than words in geopolitics In the past two weeks, we have witnessed key officials from the US and China engaging in diplomatic meetups to thaw the current frosty relationship; US Secretary of State Blinken has managed to score a brief impromptu meeting with Chinese President Xi during his recent trip to China. US Treasury Secretary Yellen will head to China this week for meetings with top Chinese officials. All these meetings are aligned by an expectation that there will be likely an official Biden-Xi meeting later this year. The two largest economies are still locked in an economic and trade cold war since 2018, and right now, the scope has expanded towards production and obtaining the technological know-how of higher-end semiconductor chips that powered the Internet of Things, and artificial intelligence networks. In a tic for tact retaliation on the recent stepped-up rhetoric by the US and its allies that advocated blocking sales of several high-end semiconductor chips to China, China has just announced an export curb on two key metals, gallium, and germanium that are required in the production of some semiconductor chips.  Looks like, the frosty relationship between US and China may persist despite the recent warmer diplomatic receptions between respective officials. China’s proxy stock market recovered and surpassed the key 200-day moving average Despite recent dismal China manufacturing and services PMIs data for June, as well as this latest episode of the US-China geopolitical flareup, Hong Kong’s benchmark stock indices have managed to stage a remarkable rebound from their respective last Monday, 27 June lows; Hang Seng Index (+3.44%), Hang Seng TECH Index (+6.27%), Hang Seng China Enterprises Index (+4.11%) at this time of the writing. All these indices managed to have daily closes yesterday, 5 July above their respective 200-day moving averages which suggests that the recent minor downtrend from 16 June 2023 to 26 June 2023 inflicted on these indices may have ended. Intermarket factor may be the driving force for this recent bout of optimism seen in these key Hang Seng Indices. The offshore yuan (CNH) seems to have started to snap its recent pronounced weakness against the US dollar reinforced by verbal interventions from China’s central bank, PBoC to step up efforts to stabilize the yuan.     Fig 1: USD/CNH medium-term trend as of 4 Jul 2023 (Source: TradingView, click to enlarge chart) The USD/CNH has started to reintegrate back below a key 7.2500 intermediate resistance intraday at this time of the writing with the daily RSI exiting from its overbought region after a bearish divergence. These observations suggest that the medium-term bullish momentum of USD/CNH has started to wane (i.e. yuan weakness abated) which in turn triggers a positive feedback loop into China’s proxy stock market (Hang Seng indices). RBA stands pat on further interest rate hike, AUD/USD shed 45 pips Australia’s central bank, RBA has decided to leave its policy cash rate unchanged at 4.10% after prior two consecutive hikes of 25 basis points each. This latest monetary policy decision has more or less been priced in by the interest rates futures market where odds of a 25 bps rate hike implied by the ASX 30-day interbank cash rate futures has been reduced to 16% as of 3 July 2023 from a chance of 53% seen two weeks ago. The accompanied monetary policy statement still has some “hawkish flavored” sprinkled on; it highlights that inflation is still too high and will remain so far for some time despite the recent monthly CPI for May showing a further decline. Ended with “the Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that”. Hence, today’s decision seems like a hawkish pause rather than the start of an interest rate cut cycle. So far, the reaction on the AUD/USD has been negative where it has given up its gains from yesterday’s session but its minor uptrend from 29 June 2023 low has not been damaged. It dropped by -45 pips from its current intraday high of 0.6687 before the RBA’s monetary policy announcement and printed its current intraday low of 0.6641 at this time of the writing. The key short-term support to watch will be at 0.6630 where its price actions have managed to stage a bullish breakout from a minor congestion resistance zone earlier last Friday, 28 June 2023 with key intermediate resistance at 0.6720 (the 20-day moving average & the minor swing high area of 27 June 2023).

USD/JPY has shed -5.4% from its 30 June 2023 high of 145.07, on sight to record its worst weekly loss since 7 November 2022. Today’s intraday sell-off has managed to hold at the 200-day moving average acting as support at 137.65. Short-term momentum has turned positive which increases the odds of a corrective rebound.   This is a follow-up on our prior analysis “USD/JPY Technical: “At risk of a minor bounce before bearish tone resumes” published earlier this week on 11 July 2023. The USD/JPY has tumbled in an almost straight-line fashion on broke below the 138.70 short-term support as highlighted (click here for a recap). The USD/JPY has torpedoed downwards by -5.40% from its recent high of 145.07 printed on 30 June 2023 to today, 14 July Asian session intraday low of 137.24 at this time of the writing. It has challenged the key 200-day moving average and recorded its worse weekly loss since the week of 7 November 2022. Talks of an imminent ultra-dovish monetary policy shift from the Bank of Japan (BoJ) in the upcoming monetary policy decision meeting on 28 July have started to make their rounds again. In today, 13 July Asian session, there are two news flows that advocate a tilt away from negative interest rates in Japan. Firstly, local Japanese media, Yomiuri reported that BoJ is likely to raise its FY 2023 annual inflation forecast to above 2% for its latest quarterly outlook report which is released on the same day as the upcoming 28 July monetary policy decision outcome. Secondly, former BoJ official, Hideo Hayakawa commented that he is expecting another tweak to the yield curve control programme on 28 July with a more aggressive bias of 50 basis points (bps) widening on the band of around 0% on the 10-year Japanese Government Bonds (JGB) yield to 1% from the current level of 0.5%. Previously, BoJ caught markets by surprise by widening the 10-year JGB yield band by 25 bps on 20 December 2022.   Holding at key 200-day moving average   Fig 1:  US/JPY medium-term trend as of 14 Jul 2023 (Source: TradingView, click to enlarge chart) The current decline in place since 30 June 2023 has reached its 200-day moving average which confluences with a graphical support of 137.65 (former swing high areas of 15 December 2022, 8 March 2023, and 2 May 2023). In addition, today’s price action at this time of the writing has formed an impending bullish daily “Hammer” candlestick pattern which indicates that odds have risen for a potential minor rebound in price actions to retrace the prior five days of steep descent.   Positive short-term momentum has emerged   Fig 2:  US/JPY minor short-term trend as of 14 Jul 2023 (Source: TradingView, click to enlarge chart) The hourly RSI oscillator has flashed out another bullish divergence signal at its oversold region and just staged a bullish breakout above a key parallel descending resistance at the 43 level. These observations suggest the recent downside momentum has abated. Watch the 137.65/40 key medium-term pivotal support for a potential corrective rebound scenario with the next intermediate resistances coming in at 139.00 and 139.70/140.10 (also the 38.2% Fibonacci retracement of the current decline from the 30 June 2023 high to today’s 14 July intraday low of 137.24). On the flip side, a break below 137.40 invalidates the corrective rebound to expose the next support at 135.70/50 (the 61.8% Fibonacci retracement of the prior up move from 24 March 2023 low to 30 June 2023 high).    

USD/JPY has shed -5.4% from its 30 June 2023 high of 145.07, on sight to record its worst weekly loss since 7 November 2022. Today’s intraday sell-off has managed to hold at the 200-day moving average acting as support at 137.65. Short-term momentum has turned positive which increases the odds of a corrective rebound. This is a follow-up on our prior analysis “USD/JPY Technical: “At risk of a minor bounce before bearish tone resumes” published earlier this week on 11 July 2023. The USD/JPY has tumbled in an almost straight-line fashion on broke below the 138.70 short-term support as highlighted (click here for a recap). The USD/JPY has torpedoed downwards by -5.40% from its recent high of 145.07 printed on 30 June 2023 to today, 14 July Asian session intraday low of 137.24 at this time of the writing. It has challenged the key 200-day moving average and recorded its worse weekly loss since the week of 7 November 2022. Talks of an imminent ultra-dovish monetary policy shift from the Bank of Japan (BoJ) in the upcoming monetary policy decision meeting on 28 July have started to make their rounds again. In today, 13 July Asian session, there are two news flows that advocate a tilt away from negative interest rates in Japan. Firstly, local Japanese media, Yomiuri reported that BoJ is likely to raise its FY 2023 annual inflation forecast to above 2% for its latest quarterly outlook report which is released on the same day as the upcoming 28 July monetary policy decision outcome. Secondly, former BoJ official, Hideo Hayakawa commented that he is expecting another tweak to the yield curve control programme on 28 July with a more aggressive bias of 50 basis points (bps) widening on the band of around 0% on the 10-year Japanese Government Bonds (JGB) yield to 1% from the current level of 0.5%. Previously, BoJ caught markets by surprise by widening the 10-year JGB yield band by 25 bps on 20 December 2022. Holding at key 200-day moving average   Fig 1:  US/JPY medium-term trend as of 14 Jul 2023 (Source: TradingView, click to enlarge chart) The current decline in place since 30 June 2023 has reached its 200-day moving average which confluences with a graphical support of 137.65 (former swing high areas of 15 December 2022, 8 March 2023, and 2 May 2023). In addition, today’s price action at this time of the writing has formed an impending bullish daily “Hammer” candlestick pattern which indicates that odds have risen for a potential minor rebound in price actions to retrace the prior five days of steep descent.   Positive short-term momentum has emerged     Fig 2:  US/JPY minor short-term trend as of 14 Jul 2023 (Source: TradingView, click to enlarge chart) The hourly RSI oscillator has flashed out another bullish divergence signal at its oversold region and just staged a bullish breakout above a key parallel descending resistance at the 43 level. These observations suggest the recent downside momentum has abated. Watch the 137.65/40 key medium-term pivotal support for a potential corrective rebound scenario with the next intermediate resistances coming in at 139.00 and 139.70/140.10 (also the 38.2% Fibonacci retracement of the current decline from the 30 June 2023 high to today’s 14 July intraday low of 137.24). On the flip side, a break below 137.40 invalidates the corrective rebound to expose the next support at 135.70/50 (the 61.8% Fibonacci retracement of the prior up move from 24 March 2023 low to 30 June 2023 high).  

Cleared above 200-day moving average ex-post US CPI. Short-term uptrend but the medium-term trend is still sideways as it remained below a major descending trendline resistance at 0.6930. Short-term momentum, hourly RSI has turned bullish. This is a follow-up analysis of our prior report, “AUD/USD Technical: Bulls rejected at 20 and 200-day moving averages ahead of US CPI” published on 12 July 2023. Click here for a recap.   Above the 200-day moving average but still below a major descending trendline resistance   Fig 1: AUD/USD medium-term trend as of 18 Jul 2023 (Source: TradingView, click to enlarge chart) The AUD/USD has staged the bullish breakout above the 200-day moving average ex-post US CPI data release, rallied by 190 pips from the breakout point triggered last Wednesday, 12 July to last Friday, 14 July intraday high of 0.6895. Overall, the bigger picture major trend of the AUD/USD is still considered sideways as its current rally above the 200-day moving average is still capped by a major descending trendline in place since the 21 February 2021 high now acting as resistance at 0.6930 (see daily chart).   Short-term minor uptrend intact   Fig 2: AUD/USD minor short-term trend as of 18 Jul 2023 (Source: TradingView, click to enlarge chart) The AUD/USD has started to pull back from last Friday, 14 July high, and shed -107 pips to print an intraday low of 0.6787 yesterday, 17 July early US session. Current key elements now suggest that the price actions of AUD/USD may resume the impulsive up move of its ongoing short-term minor uptrend in place since the 29 June 2023 low of 0.6595. Today’s price actions have formed a “higher low” right after a retest on its former minor ascending channel resistance now turns intermediate pull-back support at around 0.6800 (see 1-hour chart). Prior to the formation of the “higher low” in price actions, the hourly RSI has formed a bullish divergence signal near its oversold region which indicates that the downside momentum of the slide in price actions seen from last Friday, 14 July to yesterday, 17 July has waned. Watch the 0.6760 key short-term pivotal support with the next resistances coming in at 0.6890 and 0.6930. On the other hand, a break below 0.6760 negates the bullish tone to expose the next support at 0.6700 (also the 200-day moving average).

The Commodities Feed: Supply risks grow Russia’s bombing of port infrastructure along the Danube river in Ukraine has pushed grain prices significantly higher. This escalation risks spilling over into other parts of the commodities complex, particularly energy.   Energy – Oil marches higher Having struggled to break convincingly above US$80/bbl over the last week or so, Brent settled above US$82/bbl yesterday and in doing so broke above the 200-day moving average. The market would have taken comfort from China’s Politburo meeting where the government said it would provide further support to the property sector, stimulate consumption and tackle local government debt. China is key for global oil demand growth this year and the market has been getting increasingly concerned over the weaker-than-expected economic recovery, so any support measures will be helpful in easing some of these concerns. On the supply side, whilst remote for now, risks are growing following Russia’s escalation and bombing of Ukrainian port infrastructure along the Danube River. Whilst this is not a direct threat to energy markets, there are worries that this could spill over into other markets, particularly after Ukraine last week said that any ships heading to Russian Black Sea ports could be treated as potential military targets (in response to a similar statement from Russia). Russia ships almost 500Mbbls/d from the Black Sea port of Novorossiysk, while the CPC terminal in the port exports around 1.2MMbbls/d of Kazakh oil. Therefore, it is not too surprising that the market is starting to become a little nervous over a potential supply disruption, even if it is a remote risk for now.   In addition, stronger refinery margins are likely adding to some optimism over demand, although the strength in refinery margins appears to be more supply-driven than demand-driven at the moment. The strength has been driven predominantly by gasoline and middle distillate cracks, while fuel oil cracks are also holding relatively firm. European gasoline cracks have hit US$30/bbl, the highest levels since July last year. The strength in the gasoline market has been blamed on several factors, including tightness in the octane market, while hot weather in parts of Europe also appears to have led to some refinery disruptions. The initial strength in margins was driven by middle distillates, which would have led to some yield switching (gasoline to gasoil), however the more recent relative strength in gasoline could now see yields switching back (gasoil to gasoline). As a result, this is also offering continued support to middle distillate cracks. In addition, in the US, an unplanned outage at Exxon’s 540Mbbls/d Baton Rouge refinery, the fifth largest refinery in the US, is also providing some strength to margins. European natural gas prices also rallied significantly yesterday with TTF settling 8.5% higher on the day, taking it back above EUR30/MWh. There will be concerns over what further escalation in Ukraine could mean for the small but still important amount of Russian pipeline gas that runs through Ukraine into the EU. Fundamentally though, the European market remains in a very comfortable position with storge almost 84% full. While uncertainty may provide support to prices in the near term, we expect prices to come under pressure over much of the third quarter, given storage will be full well ahead of the next heating season (assuming no significant supply disruptions).  

AUD underperformed among the major currencies against the USD from 27 to 28 July 2023 ex-post FOMC, ECB, and BoJ. Split view among economists and interest rates traders on RBA monetary policy decision today. Short-term bearish downside momentum at this juncture as the AUD/USD failed to trade above the 200-day moving average. Key short-term resistance on AUD/USD is at 0.6740. This is a follow-up analysis of our prior report, “AUD/USD Technical: Rebounded right at 200-day moving average” published on 25 July 2023. Click here for a recap. The AUD/USD staged a rebound thereafter and reached an intraday high of 0.6821 on 27 July, just shy of the 0.6835 intermediate before it staged a bearish reversal and shed -198 pips ex-post FOMC, ECB, and BoJ to print an intraday low of 0.6623 on last Friday, 28 July. The Aussie has underperformed among the major currencies against the US dollar in the last two trading days of last week where the AUD/USD recorded an accumulated loss of -1.68% from 27 July to 28 July versus EUR/USD (-0.63%), GBP/USD (-0.71%), and JPY/USD (-0.65%) over the same period. The weak performance of the AUD/USD is likely to be attributed to the wishy-washy monetary policy guidance of the Australian central bank, RBA that led to a split forecast among economists and traders for today’s RBA monetary policy decision. Split view among economists and traders on RBA decision According to polls, the consensus among economists is calling for a hike of 25 basis points hike to bring the policy cash rate to 4.35% after a pause in the previous meeting in July. In contrast, data from the ASX 30-day interbank cash rate futures as of 31 July 2023 has indicated a patty pricing of only a 14% chance of a 25-bps hike, down significantly from a 41% chance priced a week ago.     Fig 1: AUD/USD medium-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) From a technical analysis standpoint, the price actions of the AUD/USD are still trapped within a major sideway range configuration with its range resistance and support at 0.6930 and 0.6580 respectively.       Fig 2: AUD/USD minor short-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) The AUD/USD has managed to stage a minor rebound of 117 pips from its last Friday, 28 July intraday low of 0.6622 in conjunction with an oversold reading seen in the hourly RSI oscillator on the same day. Interestingly, the minor rebound has challenged and retreated at the key 200-day moving average yesterday, 31 July during the US session (printed an intraday high of 0.6739). Right now, the hourly RSI oscillator has broken below its ascending support after it hit an overbought condition yesterday which indicates that short-term momentum has turned bearish. Watch the 0.6740 key short-term pivotal resistance to maintain the bearish tone, and a break below 0.6625 intermediate support exposes the major range support of 0.6600/6580. However, a clearance above 0.6740 negates the bearish tone to see the next resistance at 0.6835 in the first step.  

AUD underperformed among the major currencies against the USD from 27 to 28 July 2023 ex-post FOMC, ECB, and BoJ. Split view among economists and interest rates traders on RBA monetary policy decision today. Short-term bearish downside momentum at this juncture as the AUD/USD failed to trade above the 200-day moving average. Key short-term resistance on AUD/USD is at 0.6740. This is a follow-up analysis of our prior report, “AUD/USD Technical: Rebounded right at 200-day moving average” published on 25 July 2023. Click here for a recap. The AUD/USD staged a rebound thereafter and reached an intraday high of 0.6821 on 27 July, just shy of the 0.6835 intermediate before it staged a bearish reversal and shed -198 pips ex-post FOMC, ECB, and BoJ to print an intraday low of 0.6623 on last Friday, 28 July. The Aussie has underperformed among the major currencies against the US dollar in the last two trading days of last week where the AUD/USD recorded an accumulated loss of -1.68% from 27 July to 28 July versus EUR/USD (-0.63%), GBP/USD (-0.71%), and JPY/USD (-0.65%) over the same period. The weak performance of the AUD/USD is likely to be attributed to the wishy-washy monetary policy guidance of the Australian central bank, RBA that led to a split forecast among economists and traders for today’s RBA monetary policy decision.   Split view among economists and traders on RBA decision According to polls, the consensus among economists is calling for a hike of 25 basis points hike to bring the policy cash rate to 4.35% after a pause in the previous meeting in July. In contrast, data from the ASX 30-day interbank cash rate futures as of 31 July 2023 has indicated a patty pricing of only a 14% chance of a 25-bps hike, down significantly from a 41% chance priced a week ago.     Fig 1: AUD/USD medium-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) From a technical analysis standpoint, the price actions of the AUD/USD are still trapped within a major sideway range configuration with its range resistance and support at 0.6930 and 0.6580 respectively.   Short-term momentum has turned bearish   Fig 2: AUD/USD minor short-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) The AUD/USD has managed to stage a minor rebound of 117 pips from its last Friday, 28 July intraday low of 0.6622 in conjunction with an oversold reading seen in the hourly RSI oscillator on the same day. Interestingly, the minor rebound has challenged and retreated at the key 200-day moving average yesterday, 31 July during the US session (printed an intraday high of 0.6739). Right now, the hourly RSI oscillator has broken below its ascending support after it hit an overbought condition yesterday which indicates that short-term momentum has turned bearish. Watch the 0.6740 key short-term pivotal resistance to maintain the bearish tone, and a break below 0.6625 intermediate support exposes the major range support of 0.6600/6580. However, a clearance above 0.6740 negates the bearish tone to see the next resistance at 0.6835 in the first step.

Recent bullish breakout from “Descending Wedge” has led to a 10% rally to reach a medium-term resistance zone of US$83.80/84.90. Technical elements are now advocating a potential corrective pull-back with supports coming in at US$79.80 and US$77.20. Today’s surprise three interest rate cuts by China’s central bank, PBoC has triggered a risk-off behaviour in cross-assets (FX, stock indices, commodities) via a negative reflexivity feedback loop.   This is a follow-up analysis of our prior report, “WTI Oil Technical: Potential bullish reversal Descending Wedge in play” published on 21 July 2023. Click here for a recap. The price actions of West Texas Oil (a proxy of WTI crude oil futures) have indeed shaped the bullish breakout from its “Descending Wedge” configuration on 24 July and rallied by +10% to print an intraday high of US$84.92 per barrel on last Thursday, 10 August which coincided with a medium-term resistance zone of US$83.80/84.90 (see daily chart). Today, West Texas Oil has shed almost -1% intraday at this time of the writing to print an intraday low of $81.60 that recorded an accumulated loss of -3.7% in the past two sessions since Thursday, 10 August high of US$84.92. The current weakness of oil has been in line with a broad-based risk-off behaviour seen in cross-assets today (FX, major stock indices & industrial metals commodities) attributed to the contagion fear in China’s financial system after a major trust fund failed to make timely payments to holders of its wealth management products that are backed by unsold properties of indebted property developers. Today’s unexpected interest rate cut by China’s central bank, PBoC on its 1-year medium-term lending facility (MLF) interest rate by 15 basis points (bps), more than the previous 10 bps cut implemented in June to bring it down to 2.50%, its lowest level since late 2009. The 1-year MLF rate is a benchmark interest rate in China where PBoC provides a credit line to major commercial banks which in turn acts as a guide for another two benchmark interest rates that commercial banks charged to customers: the 1-year and 5-year loan prime rates. Interestingly, PBoC enacted two more interest rate cuts today on the overnight standing lending facility (SLF) which was cut by 10 bps to 2.65% while the 7-day and 1-month SLF rates were cut by 10 bps each to 2.80% and 3.15% respectively. Three interest rate cuts in a single day are considered a “rare” event in China given that the current guidance from China’s top policymakers is in favour of targeted stimulus policies to address the current economic growth slowdown rather than enacting “opening the liquidity floodgate” measures. Hence, today’s surprise move on China’s more accommodative monetary policy stance is perceived as a heightened red alert on its financial system where trust firms’ default risks have risen that may trigger a systemic contagion which in turn created the negative reflexivity feedback loop seen today.     Daily RSI oscillator conditions suggest an imminent short-term pull-back   Fig 1:  West Texas Oil medium-term trend as of 15 Aug 2023 (Source: TradingView, click to enlarge chart) The daily RSI oscillator flashed a bearish divergence condition at its overbought region on 9 August 2023 which suggests that the medium-term upside momentum of West Texas Oil is overstretched, and its price actions face the risk of a corrective pull-back to retrace certain portions of the current 26% rally of its medium-term uptrend phase from 28 June 2023 low of US$66.95. A bearish breakdown below minor ascending channel support   Fig 2:  West Texas Oil minor short-term trend as of 15 Aug 2023 (Source: TradingView, click to enlarge chart) Today’s price actions of West Texas Oil have staged a bearish breakdown below its minor ascending channel support from the 28 June 2023 low. Watch the US$83.80 key short-term pivotal resistance to maintain the short-term bearish tone to see the next support coming in at US$79.80 and a break below it exposes US$77.20 next (also the key 200-day moving average). On the flip side, a clearance above US$83.80 invalidates the corrective pull-back scenario for a retest of the 10 August 2023 swing high area of US$84.90 and a clearance above it sees the next resistance coming in at US$87.00 (psychology level & Fibonacci extension).  

EUR: Pessimism reigns Yesterday's worrying release of flash PMIs for August certainly made their mark on markets. The ECB's trade-weighted euro fell around 0.5% and the two-year EUR/USD swap differential widened by a large 10bp on the day. At around 145bp in favour of the dollar, this differential is back to the widest levels seen since March and is a clean EUR/USD negative. The EUR/USD test of the 200-day moving average at 1.0800 yesterday looked fully justified and were it not for those US payroll revisions, EUR/USD would be trading much closer to 1.0800 this European morning. We have not heard much from ECB speakers recently (President Christine Lagarde will speak late tomorrow), but markets are quickly losing confidence that the central bank will be able to squeeze in another rate hike before the drop in eurozone activity closes the door on the tightening cycle. This is certainly frustrating the case for EUR/USD to be making it quickly back above 1.10. The clear near-term range for EUR/USD looks to be 1.0800-1.0930. Despite today's slightly better risk environment, we doubt investors will want to chase EUR/USD too much higher and unless there is a sharp spike higher in US initial jobless claims today, EUR/USD may well end up gravitating back towards 1.0800.

Last Friday’s price actions of spot Gold (XAU/USD) have managed to find support again at the 200-day moving average ahead of the US CPI data release & ECB monetary policy decision this week. The recent -5.15 % decline seen in Gold from its 20 July 2023 swing high of US$$1,987.53 has started to see some signs of short-term bullish reversal elements since 21 August 2023. The up-trending 10-year US Treasury real yield has also started to consolidate between 1.95% to 2.00% level which may negate the bearish tone on Gold at least in the short-term. US$1,910 support and US$1,932 resistance are the two key short-term technical levels to watch.   Since its 20 July 2023 swing high of US$1,987.53, spot Gold (XAU/USD) has declined by -5.15% to print a low of US$1,885 on 17 August 2023 in line with a rising longer-term 10-year US Treasury real yield which increased the opportunity costs of holding gold as it is a non-interest yielding asset.   Major uptrend remains intact Fig 1: Gold (XAU/USD) major trend as of 11 Sep 2023 (Source: TradingView, click to enlarge chart) Despite the underperformance of Gold seen in the past five weeks, its major uptrend phase in place since the 3 November 2022 low of US$1,616 remains intact as the -5.15% fall from the 20 July 2023 high of US$1,987.15 has managed to stall at the lower boundary of a major ascending channel from its 3 November 2022 major swing low and close to the 38.2% Fibonacci retracement of the prior major uptrend phase from 3 November 2022 low to 4 May 2023 high (see daily chair). Also, the up-trending 10-year US Treasury real yield (derived via the inflation-protected securities, TIPS of the same duration) has started to consolidate at the 1.95% to 2.00% level which may negate the bearish tone on Gold at this juncture.     Short-term momentum has tilted toward the bullish camp  

GBP: Paring back of BoE hike expectations encouraging reversal of GBP gains The pound has continued to trade at weaker levels overnight after selling off yesterday following the release of the latest labour market report from the UK. It has resulted in EUR/GBP rising back above the 0.8600-level while cable is continuing to hold just above support from the 200-day moving average that comes in at around 1.2430. The pound has been undermined recently by the paring back of BoE rate hike expectations as we highlighted in our latest FX Weekly report (click here). The UK rate market has become less confident that the BoE will deliver multiple further rate hikes in the current tightening cycle. There are 19bps of hikes priced in for next week’s MPC meeting and 39bps of hikes by February of next year. It implies that the UK rate market is currently attaching around a 50:50 probability to the BoE delivering one final hike after next week’s 25bp hike which is viewed as almost a one deal. The main trigger for the paring back of BoE rate hike expectations have been comments from BoE officials including Governor Bailey and Chief Economist Pill who have signalled that the rate hike cycle is close to an end and that keeping rates higher for longer is preferred to the alternative of hiking rates further towards 6.00%. Next week’s updated forward guidance from the MPC meeting will be important in determining whether the BoE plans to deliver one final hike or is becoming more confident that it has raised rates enough   At the same time the recent data flow from the UK is helping to dampen BoE rate hike expectations as well. While yesterday’s labour market report did show average weekly earnings hitting a new high of 8.5% in July, the details of the report provided more encouragement that labour demand continues to weaken and wage growth is beginning to slow. Employment dropped by 207k and the unemployment rate ticked up further to 4.3% as it moved further above the cycle low of 3.5% from las August. Back in the August MPR the BoE had forecast the unemployment rate would rise to only 4.4% by the end of next year. Job vacancies also continued to fall and moved below 1 million. After stripping out more volatile bonuses, regular pay growth in the private sector has slowed in recent months coming. The HMRC’s median pay measure even declined by -0.5%M/M suggesting the peak has been reached for pay growth.   Furthermore, it has just been revealed that services sector growth was much weaker than expected at the start of Q3. After expanding by 0.5%M/M in June, service sector output contracted by -0.5% in July. It has reinforced the pound’s downward momentum  

The small-cap Russell 2000 which is considered as a better proxy of the US economy has just broken below its key 200-day moving average. It is the worst-performing major US benchmark stock index since August 2023. Its recent major downtrend phase from 5 November 2021 to 16 June 2022 started ahead of the other indices; S&P 500, Nasdaq 100, and Dow Jones Industrial Average. Given such a leading element, a further down move in the Russell 2000 may trigger a similar negative feedback loop into the other US benchmark stock indices. Watch its key short-term resistance at 1,865.   Since the US regional banking crisis that imploded in early March this year, the performance of the small-cap Russell 2000 has not made any headway as it failed to break above its major “Symmetrical Triangle” range resistance at 2,009 in place since 16 August 2022. Also, in the past two months, it has been the worst-performing major US benchmark stock indices where it ended August with a loss of -5.17%, way below the S&P 500 (-1.77%), Nasdaq 100 (-1.62%), Dow Jones Industrial Average (-2.36%). For the current month-to-date performance as of 13 September, the Russell 2000 has remained in the doldrums with a loss of -3.10% and underperformed against the S&P 500 (-0.89%), Nasdaq 100 (-0.98%), Dow Jones Industrial Average (-0.42%) over the same period.   Broke below key 200-day moving average   Fig 1: US Russ 2000 major and medium-term trends as of 14 Sep 2023 (Source: TradingView, click to enlarge chart) The current price actions of the US Russ 2000 Index (a proxy for the Russell 2000 futures) have inched lower since the 1 August 2023 high of 2,009 and it is now almost at a similar price level during the onset of the US regional banking liquidity crisis that erupted on 9 March 2023. Technical analysis and momentum factor are now flashing signs of potential medium-term weakness as yesterday’s daily price action at the close has broken below its key 200-day moving average slightly at the end of yesterday, 13 September US session. Also, the US Russ 2000 Index is the sole US benchmark index that has breached below the key 200-day moving average ahead of the others (S&P 500, Nasdaq 100 & Dow Jones Industrial Average). Interestingly, in the prior major downtrend phase, the US Russ 2000 Index kickstarted the bearish movement ahead of the rest where its all-time high of 2,464 peaked on 8 November 2021 before the respective peak periods of all-time highs of the S&P 500 (4 January 2022), Nasdaq 100 (22 November 2021), Dow Jones Industrial Average (5 January 2022).   Therefore, if the US Russ 2000 starts to exhibit another bout of multi-week down move sequence thereafter and breaks below the major “Symmetrical Triangle” range support at 1,734, it may signal the start of another major downtrend phase for the US benchmark stock indices. Oscillating within a short-term minor downtrend   Fig 2: US Russ 2000 short-term minor trend as of 14 Sep 2023 (Source: TradingView, click to enlarge chart) Since its 1 September 2023 high of 1,931, the price actions of the US Russ 2000 Index have evolved within a minor descending channel and traded below a downward-slopping 20-day moving average which indicates a short-term minor downtrend is in motion. Watch the 1,865 key short-term pivotal resistance to maintain the short-term bearish scenario to see the intermediate supports coming in at 1,832 and 1,814 (Fibonacci extension from 1 September 2023 high, lower boundary of the minor descending channel & 3 April/19 April 2023 swing lows). On the flip side, a clearance above 1,865 negates the bullish tone for a squeeze up towards the 1,894/1,898 resistance zone (congestion area of 1 September/6 September 2023 & 61.8% Fibonacci retracement of the current minor down move from 1 September 2023 high to 13 September 2023, US session low).  

As mentioned in previous updates, the reason why gold in our opinion has been holding up well despite the mentioned headwinds, is likely to be a market in search for a hedge against the current negative market sentiment and most importantly, the FOMC failing to deliver a soft, as opposed to a hard landing. A hard landing or stagflation may occur if the Fed keeps the Fed funds rate too high for too long or in the unlikely event the economy becomes too hot to handle. Other drivers can be rising energy prices keeping inflation elevated while hurting economic activity or a financial of geopolitical crisis erupts. Demand for gold as a hedge against a soft-landing failure is unlikely to go away as the outlook for the US economic outlook in the months ahead looks increasingly challenged. With that in mind, we maintain a patiently bullish view on gold while wondering whether the yellow metal in the short-term will continue to be able to withstand additional yield and dollar strength. The timing for a fresh push to the upside will remain very US economic data dependent as we wait for the FOMC to turn its focus from rate hikes to cuts, and during this time, as seen during the past quarter, we are likely to see continued choppy trade action. Spot gold, in a downward trending channel since May, is currently stuck in a $1900 to $1950 range with additional dollars and yield strength raising the risk of a short-term break below which may see $1885 being challenged. A close back above the 200-day moving average, last at $1927, is likely to coincide with a break of the mention downtrend, opening for a fresh attempt to challenge resistance in the $1950 area.  

Recent price actions of the Nikkei 225 are still trading above its 20-day moving average despite the latest official downbeat assessment of Japan’s economy. Significant correlation flip between USD/JPY and Nikkei 225 may persist as a weaker JPY may not be a main driver to drive up the price actions of Nikkei 225. A strengthening JPY may see the outperformance of consumer-oriented TOPIX equities sectors such as Retail Sales and IT & Services. A new medium-term uptrend may have kickstarted in Nikkei 225, watch the 32,090 key medium-term support. Japan’s government on this Wednesday, 22 November downgraded its assessment for the first time in ten months, citing economic growth in Japan has recovered moderately but appeared to be pausing due to weak domestic demand. The benchmark Nikkei 225 has continued to trade above its upward-sloping 20-day moving average since the start of this month, November, and rallied by +11% from its key swing low area of 30,530 printed on 4 and 24 October 2024. The latest official downbeat economic assessment has not derailed the current bullish tone of the Nikkei 225 as it has managed to remain above the “gapped up” support of 32,820 formed on last Wednesday, 15 November; the effect in a global risk-on herding behaviour reinforced by the softer than expected US CPI print for October that was released on last Tuesday, 14 November (current level of Nikkei 225 is at 33,452 as of 22 November).   Significant correlation flip between Nikkei 225 & USD/JPY   Fig 1: Correlation trends between Nikkei 225, USD/JPY & S&P 500 as of 22 Nov 2023 (Source: TradingView, click to enlarge chart) Interestingly, the previous long-term traditional high direct correlation between the movements of the Nikkei and USD/JPY has broken down based on its latest 20-day rolling correlation coefficient reading of -0.15. From a fundamental standpoint, a persistently weaker JPY (where the JPY has depreciated by as much as 15.9% against the US dollar since the start of 2023) is likely to have a more detrimental effect now on Japan’s economy due to the risk of higher imported inflation which in turn drives up imported energy costs for resources-scare Japan. Moreover, oil prices are likely to remain sticky on the upside in the medium term as OPEC+ leading member, Saudi Arabia seems to be still in favour of extending current oil supply cuts into 2024. Therefore, a stronger JPY is much needed for Japan at this juncture to negate the risk of elevated imported inflation that can dent business and consumer confidence which in turn dampens internal domestic spending. Hence, this latest narrative explains the current “correlation flip” between USD/JPY and Nikkei 225.   Consumer-oriented TOPIX equities sectors may benefit from a stronger JPY   Fig 2: 1-month rolling performance of the 17 TOPIX sectors as of 22 Nov 2023 (Source: TradingView, click to enlarge chart)   In the past week, the JPY has started to strengthen against the US dollar driven by more of an increasing expectation of a dovish tilt from the US Federal Reserve rather than a hawkish Bank of Japan’s modus operandi. The JPY has been appreciated by as much as around +3% against the US dollar since last Monday, 13 November and it has started to translate to an uptick in bullish sentiment seen in the Japanese equities sectors that are tied to business and consumer confidence and domestic spending. Based on the one-month rolling performance of the 17 TOPIX sectors as of 22 November 2023, Retail Trade (+7.59%) and IT & Services (+7.13%) have started to show outperformance against the broader TOPIX index (+5.98%).   Potential start of new medium-term uptrend for Nikkei 225   Fig 3: Nikkei 225 medium-term trend as of 22 Nov 2023 (Source: TradingView, click to enlarge chart) In the lens of technical analysis, the recent bullish momentum seen in the Japanese stock market is likely to trigger the potential start of a medium-term (multi-week to multi-month) uptrend phase in the Nikkei 225 after the -9.5% corrective decline seen from 16 June to 24 October 2023. The current price action of the Nikkei 225 as of 22 November is retesting a 33-year swing high of 33,770 after an initial pull-back seen on Monday to Tuesday. Meanwhile, the daily RSI momentum indicator has continued to exhibit positive momentum readings after its earlier bullish momentum breakout and retest on 7 November 2023. If the 32,090 key medium-term pivotal support holds, a clearance above 33,770 is likely to see the next medium-term resistance coming in at 36,600. However, a break below 32,090 sees another round of corrective decline to retest the 200-day moving average that also confluences closely with swing low areas of 4/24 October 2023, acting as a support at 30,530.    

An increase in dovish expectations on a rapid pace of Fed funds rate cuts projected for 2024 indicates a potential impending recession. An uptick in recession risk may see a further deterioration in the US 10-year Treasury real yield which reduces the opportunity costs for holding Spot Gold (XAU/USD). Spot Gold (XAU/USD) has managed to trade back above its 20-day moving average. This is a follow-up analysis of our prior report, “Gold Technical: Extension of corrective decline ahead of FOMC” published on 11 December 2023. Click here for a recap. The price actions of Spot Gold (XAU/USD) have shaped the extended corrective decline to print an intraday low of US$1,973 on 13 December during the European session ahead of the FOMC meeting announcement on the same day which was just a whisker away from the US$1,955 support highlighted in our previous analysis. All in all, it has shed -8.2% from its current all-time high of US$2,149 printed on 4 December 2023 which represents a retracement of close to 50% of its ongoing medium-term uptrend phase in place since the 6 October 2023 low of US$1,810. The US Federal Reserve unleashed its dovish pivot last Wednesday, 13 December where its latest “dot plot” projection for the trajectory of the Fed funds rate has indicated a total of three rate cuts (75 basis points) pencilled in for 2024, upped from two projected rate cuts in the prior September’s dot plot which in turn led to an increased in dovish expectations of market participants to price in six rate cuts, a total of 150 bps in 2024 via the 30-day Fed funds rate futures calculated by the CME FedWatch tool. This kind of dovish expectation that has skewed towards a rapid pace of the Fed funds rate cuts projection in the upcoming monetary easing cycle seems to indicate an impending recessionary scenario in 2024 that may put further downside pressure on the US 10-year Treasury real yield. US 10-year Treasury real yield broke below the 200-day moving average   Fig 1: US 10-year Treasury real yield medium-term trend as of 18 Dec 2023 (Source: TradingView, click to enlarge chart) The price movement of the US 10-year Treasury real yield has broken down below a major support zone of 1.82%/1.73% (also the 200-day moving average) which room for further downside potential with the next intermediate support coming in at 1.38%. Based on intermarket analysis, a further deterioration in the US 10-year Treasury real yield may support another round of potential impulsive upmove sequence in gold prices due to lower opportunity costs as gold does not produce “fixed coupons income streams” like bonds.  

Consensus is expecting no change to BoJ’s monetary policy, but its policy statement and Governor Ueda’s press conference may signal an imminent shift away from short-term negative interest rates. Mounting pressures from public and private sectors with Economy Minister Shindo attending today’s monetary policy decision meeting as a representative from the Cabinet Office. Technical analysis suggests further potential weakness in the USD/JPY. This is a follow-up analysis of our prior report, “USD/JPY Technical: Potential JPY bullish pressure reasserts” published on 12 December 2023. Click here for a recap. In December, the JPY was the best performer among the major currencies against the US dollar where it soared by +4.85% as of 19 December at this time of the writing. The recent JPY strength has been attributed to two factors; the US Federal Reserve’s dovish pivot where it guided market participants by projecting three cuts on the Fed funds rate in 2024. In contrast, hawkish guidance from top BoJ officials made two weeks ago where Governor Ueda and Deputy Governor Himino’s remarks have dialled up speculations that the current short-term negative interest rate policy in Japan in place since 2016 is likely to be scrapped sooner than expected and may come as early on the 23 January 2024 monetary policy meeting where BoJ releases its latest economic outlook report on the same day. Today, the Bank of Japan (BoJ) will conclude its last two-day monetary policy meeting for 2023 while the consensus expectations are expecting no change to the current monetary policy setting, BoJ can still potentially lay the groundwork for its upcoming shift away from short-term negative interest rates via its policy statement and BoJ Governor Ueda’s press conference at 3.30 pm after the close of the Japan’s stock market. BoJ faced mounting pressures from the public and private sectors Interestingly, ahead of today’s monetary policy decision outcome, it seems that mounting pressure from the public and private sectors has arisen, prominent Jaan business lobby Keidanren head Tokura said yesterday that BoJ must normalize monetary policy as early as possible. Also, today’s meeting outcome will be attended by Economy Minister Shindo as a representative from the Cabinet Office who cannot vote on monetary policy decisions. It is rare for a cabinet minister to attend BoJ monetary policy meetings as such “attendee roles” are usually assigned to deputy ministers. In the past meetings that cabinet ministers attended had resulted in major monetary policy changes such as the launch of the mega quantitative asset-buying programme in April 2013. USD/JPY is hovering around the 200-day moving average Fig 1: USD/JPY medium-term trend as of 19 Dec 2023 (Source: TradingView, click to enlarge chart   The medium and short-term downtrend phases of the USD/JPY in place since a test on its 151.95 major resistance on 13 November 2023 remain intact as price actions remain below its downward sloping 20 and 50-day moving averages without a bullish divergence condition seen on its daily RSI momentum indicator at its oversold region. Short-term momentum has turned bearish Fig 2: USD/JPY short-term minor trend as of 19 Dec 2023 (Source: TradingView, click to enlarge chart In the shorter term as depicted on the hourly chart, the RSI momentum indicator has staged a bearish breakdown below its parallel ascending support after it hit overbought status yesterday, 18 December. Watch the 143.30 short-term pivotal resistance and a break below the recent 140.95 low printed last Thursday, 14 December may expose the next intermediate support at 139.20 in the first step (also the close to the 50% Fibonacci retracement of the prior medium-term uptrend phase from 16 January 2023 low to 13 November 2023 high). On the other hand, a clearance above 143.30 negates the bearish tone for a potential minor countertrend rebound to see the next intermediate resistances coming in at 144.80 and 146.70 if 144.80 is taken out.    

WTI crude oil has started to evolve into a short-term uptrend phase reinforced by the recent liquidity infusion by China’s central bank, PBoC upcoming 50 bps cut on the RRR. The current 5-day rally of WTI crude oil has reached a key medium-term resistance zone of US$79.00/79.40 with a short-term overbought condition. At the risk of a minor mean reversion decline with intermediate supports at US$75.30 and US$74.80. This is a follow-up analysis of our prior report, “WTI Oil Technical: Sideways within a potential minor bottoming configuration” published on 16 January 2024. Click here for a recap. Benchmark oil prices have bottomed and traded higher since the start of this week as the West Texas Oil (a proxy of WTI crude oil futures) had rallied by +4.9% week-to-date at this time of the writing, its best weekly gain since the 9 October 2023. On top of the rising geopolitical risk premium that is supporting firmer oil prices from the ongoing tensions in the Middle East region and Red Sea shipping route, the additional liquidity infusion from China’s central bank (PBoC) with an upcoming 50 bps cut on commercial banks’ reserve requirement ratio has also triggered an indirect “demand-pull” catalyst on oil prices. CTA funds may have contributed to the current bullish momentum frenzy All in all, these factors have created short-term reflexive positive feedback into the oil market reinforced by possible speculative CTA funds that run on momentum-driven models that piled into oil futures with a bullish bias. The price actions of the benchmark Brent and WTI crude oil have pierced above their respective 50-day moving averages on Monday, 22 January and have capped their prices previously since late October 2023; positive momentum begets positive momentum. At the risk of a minor mean reversion decline below US$78.40 Fig 1:  West Texas Oil medium-term trend as of 26 Jan 2024 (Source: TradingView, click to enlarge chart)   Fig 2:  West Texas Oil minor short-term trend as of 26 Jan 2024 (Source: TradingView, click to enlarge chart) In the lens of technical analysis, the recent push-up of West Texas Oil since the start of this week has led its hourly RSI momentum indicator to hover close to an extremely overbought level of around 74 in place since 12 January 2024. This current overbought condition has also taken form as its price action is now coming close to a key medium-term resistance zone of US$78.00/78.40 (upper boundary of the minor ascending channel from 17 January 2024 low & close to the key 200-day moving average). Therefore, the odds have increased for a potential minor mean reversion decline to retrace a portion of the ongoing short-term uptrend phase with the next intermediate supports coming in at US$75.75/75.30 and US$74.80. On the flip side, clearance above the US$78.40 pivotal resistance invalidates the mean reversion decline scenario for a continuation of the bullish trend towards the next intermediate resistance at US$79.75 in the first step.