Asian Open: Risk-Off Ahead of FOMC Minutes as OPEC+ Cancels

The cancellation of the OPEC+ meeting ahead of FOMC minutes proved too much for sentiment, seeing USD, JPY and bond prices higher whilst commodities, equities and yields fell.

FED 2

Asian Futures:

  • Australia's ASX 200 futures are down 0 points (0%), the cash market is currently estimated to open at 7,261.80
  • Japan's Nikkei 225 futures are down -270 points (-0.94%), the cash market is currently estimated to open at 28,373.21
  • Hong Kong's Hang Seng futures are down -165 points (-0.59%), the cash market is currently estimated to open at 27,907.86

UK and Europe:

  • UK's FTSE 100 index fell -64.03 points (-0.89%) to close at 7,100.88
  • Europe's  Euro STOXX 50  index fell -34.7 points (-0.85%) to close at 4,052.67
  • Germany's DAX  index fell -150.59 points (-0.96%) to close at 15,511.38
  • France's CAC 40 index fell -60.06 points (-0.91%) to close at 6,507.48

Tuesday US Close:

  • The Dow Jones Industrial fell 208.98 points (-0.6%) to close at 34,557.37
  • The S&P 500 index fell -8.8 points (-0.21%) to close at 4,343.54
  • The Nasdaq 100 index rose 58.725 points (0.4%) to close at 14,786.36


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Indices: Wall Street’s rally loses steam ahead of FOMC minutes

Wall Street failed to maintain its bullish momentum of last week, with the Dow, S&P and Russell 200 closing lower. The S&P 500 printed a bearish hammer (and outside candle) led lower by energy and financial sectors. The cancellation of the OPEC+ meeting weighed on sentiment, sending oil and energy stocks lower. But traders are also likely to be locking in profits after a strong run ahead of FOMC minutes released later today. The Nasdaq notched up a 0.4% gain on the day after a rocky start, closing the day with a potentially bearish candle (hanging man reversal).

European equities were broadly lower on a set of weak regional data. German industrial orders fell unexpectedly by -3.7% in May, its worst monthly slump since the pandemic, as demand outside of Germany dwindled. Germany’s ZEW economic sentiment also slumped to 63.3 from 79.8 and the eurozone’s expectations read fell to 61.2 from 81.3.

The ASX 200 may come under pressure today with a weak lead from Wall Street. Although yesterday’s bearish engulfing post-RBA meeting is a bit of a downer for bulls too. 7240 is the first line of defence, with 7216 and 7200 also making likely targets for bears.


ASX 200 Market Internals:

ASX 200: 7261.8 (-0.73%), 06 July 2021

  • Energy (0.04%) was the strongest sector and Telecomm Services (-2.02%) was the weakest
  • 8 out of the 11 sectors closed lower
  • 6 sectors underperformed the ASX 200
  • 36 (18.00%) stocks advanced, 153 (76.50%) stocks declined
  • 6 hit a new 52-week high, 0 hit a new 52-week low
  • 72% of stocks closed above their 200-day average
  • 55% of stocks closed above their 50-day average
  • 37.5% of stocks closed above their 20-day average

Outperformers:

  • + 4.62%   -  Oil Search Ltd  (OSH.AX) 
  • + 3.9%   -  Whitehaven Coal Ltd  (WHC.AX) 
  • + 2.45%   -  Dexus  (DXSDB.AX) 

Underperformers:

  • -8.75%   -  Polynovo Ltd  (PNV.AX) 
  • -6.19%   -  Appen Ltd  (APX.AX) 
  • -5.44%   -  Ramelius Resources Ltd  (RMS.AX) 


Forex: Dollar strengthens ahead of FOMC minutes


Traders are bullish on the dollar again after a two-day correction, with hopes high that further details of tapering will be revealed in the minutes released overnight at 04:00 AEST. Concrete details over tapering is likely to be dollar bullish, although expectations require fulfilling so disappointment over the ‘T’ word could easily send the dollar lower too.

Technically, the daily trend on the US dollar index (DXY) favours bulls with a bullish engulfing candle finding support at its 10-day eMA, and above the 200-day. Moreover, a Moring Star Reversal pattern (3-bar reversal) has formed as part of a higher low, so a break of last week’s highs (or gap resistance to be safe) assume bullish continuation).


CAD was the weakest major currency, dragged down with heavy losses for oil prices and related equities. The Japanese yen was the strongest currency as it sucked in safe-haven flows and the USD was a close second.

  • EUR/USD didn’t want to miss out on key reversal day either, although it held above Friday’s low. A break of that key levels assumes bearish trend continuation.
  • USD/CAD was the strongest performing major pair and confirmed support at 1.2300 and its 50 and 20-day eMA’s. From here, bulls may be tempted with dips towards the 1.2370 – 1.2400 zone
  • AUD/USD closed back below its 200-day eMA after a false (intraday) break above it to close the day with a bearish outside candle. NZD/USD is in the same boat, below its 200-day eMA with a bearish outside pinbar.


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Commodities: Key reversals on oil

After a couple of delays, OPEC+ member finally cancelled their meeting yesterday as members remained in a stalemate over how much to increase supply. Oil prices fell sharply after hitting their highest levels since October 2018, and quickly reversed most of last week’s gains with key-reversal days (bearish outside days on high volume).

WTI fell -2.4% during its worst session in five weeks, and out near-term bias is bearish beneath 74.25. A key reversal at a major resistance level is not something to ignore, even if it is against such a strong bullish move.

Silver also produced a bearish outside day after briefly testing 26.64 resistance to take prices inside their three-week range and flossed just above $26.00. So, a swing high appears to be in place, although we have to wait to see if momentum can now accelerate and break beneath the 200-day eMA at 25.42 before assuming trend continuation.

Gold printed a bearish pinbar after a false break above its 200-day eMA, although its essentially back within its three-week range so one for rage traders to consider over the near-term perhaps.


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