Asian Open: The Dollar Hits a 10-Week Low

The US dollar index printed a bearish engulfing / outside week, suggesting a break below 90.0 could be imminent.

Downtrend 1


Asian Futures:

  • Australia's ASX 200 futures are down -4 points (-0.06%), the cash market is currently estimated to open at 7,076.80
  • Japan's Nikkei 225 futures are up 20 points (0.07%), the cash market is currently estimated to open at 29,377.82
  • Hong Kong's Hang Seng futures are up 127 points (0.45%), the cash market is currently estimated to open at 28,737.65

UK and Europe:

  • UK's FTSE 100 index rose 53.54 points (0.76%) to close at 7,129.71
  • Europe's  Euro STOXX 50  index rose 34.81 points (0.87%) to close at 4,034.25
  • Germany's DAX  index rose 202.91 points (1.34%) to close at 15,399.65
  • France's CAC 40 index rose 28.42 points (0.45%) to close at 6,385.51

Friday US Close:

  • The Dow Jones Industrial rose 229.26 points (0.66%) to close at 34,777.76
  • The S&P 500 index rose 30.98 points (0.74%) to close at 4,232.60
  • The Nasdaq 100 index rose 105.896 points (0.78%) to close at 13,719.63


It was a decent finish to the week for European bourses and UK stocks. A strong close for the FTSE 100 saw the index close to its highest level since February 2020 and print a bullish outside week. The CAC and STOXX 50 closed the week to a record high and also printed a bullish outside week, whilst the DAX found support at its 10-week eMA and printed a bullish hammer / bullish outside week, closing just shy of 15,400 yet beneath its record high set two weeks ago.  

It was a mixed picture on Wall Street, with the S&P 500 and Dow Jones closing to at a record high, the Russel 2000 closing flat for the week yet finding support above its 10-week eMA for a fifth consecutive week, and the Nasdaq 100 closing at a four week low yet above its 10-week eMA.

The ASX 200 is making hard work of breaking above 7,100. Given May is usually a bearish month for the index, and that bulls are struggling to take full control, we are mindful of its potential to roll over the coming week/s. Yet defining a bearish entry point is not easy either, with so many overlapping candles at these highs. That said, we would consider a daily close beneath 6993 as a sign that the market has topped, and a daily close above 7100 a sign that perhaps this bull trend still has legs.


ASX 200 Market Internals:


ASX 200: 7080.8 (0.27%), 07 May 2021

  • Materials (1.13%) was the strongest sector and Information Technology (-2.34%) was the weakest
  • 6 out of the 11 sectors outperformed the index
  • 8 out of the 11 sectors closed higher
  • 1 hit a new 52-week high, 0 hit a new 52-week low
  • 68.5% of stocks closed above their 200-day average
  • 61% of stocks closed above their 50-day average
  • 45% of stocks closed above their 20-day average

Outperformers

  • + 7.42%   -  Webjet Ltd  (WEB.AX) 
  • + 7.26%   -  Flight Centre Travel Group Ltd  (FLT.AX) 
  • + 6.31%   -  Corporate Travel Management Ltd  (CTD.AX) 

Underperformers:

  • -7.77%   -  Pro Medicus Ltd  (PME.AX) 
  • -4.97%   -  Nearmap Ltd  (NEA.AX) 
  • -4.14%   -  Afterpay Ltd  (APT.AX) 

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Forex: Another dire week for the dollar

The US dollar index (DXY) closed to an 11-week low and printed a bearish engulfing week on Friday. And there could be further downside to come. USD/CHF closed at its lowest level since February and at the low of the week. EUR/USD hit our 1.2150 target projected from the bullish wedge breakout. And the fact it occurred over just a two day period suggests further gains may lie ahead. USD/JPY closed to an eight-day low and created a lower high. The next key level for bulls to defend is the bullish trendline form the 2021 low, a break below of which could trigger a bearish follow-through and run towards the 107.5 low.

The Canadian dollar is the ‘go to’ currency for bulls since the BOC tapered, and are the only central bank with a hawkish bias among developed nations. That said, a disappointing employment report on Friday saw CAD pairs give back some gains for the week and print reversal candles on the daily chat to warn of a corrective phase.

AUD/JPY closed above 84.90 resistance to confirm its bullish breakout, highlighted in Friday’s Asian Open report. AUD/USD closed to a 10-week high and printed a bullish outside week and AUD/CAD closed on Friday with a bullish engulfing candle which puts the anticipated break beneath December’s low on ice.


AUD/NZD finds itself at a technical juncture, having found support at the December trendline yet lacking the commitment to break above 1.0800. Technical juncture’s are good as they present two clear opportunities, for bulls and bears. Should prices break beneath the 1.0714 low, it invalidates the bullish trendline and suggests and brings the 1.064 low into focus (a trendline break also projects a target near its base, which would be the December low in this case). However, a daily close above 1.0800 would be a noteworthy victory for the bull camp and brings 1.0900 into focus.  


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Weekly Commitment of Traders Report (COTR)

As of Tuesday 4th May 2021:

  • Traders were their most bullish on CAD futures since February 2020
  • Net-long exposure to US dollar index (DXY) futures are their least bullish since March
  • Bullish exposure to NZD futures rose for a third consecutive week, with bullish exposure rising to an eight week high
  • Net-long exposure to silver and coper rose to an 11 and 10-week high respectively


Commodities: Gold continues to shine

Gold hit our 1835 target on Friday following NFP’s disappointing print. Given momentum has become increasingly bullish since its 1676 low at the end of March, we continue to suspect its corrective low from the record high has been set and a new trend is underway. Its next major resistance is the upper trendline from its corrective channel around 1860 and our bias remains bullish above 1800.

Oil prices retraced for a third consecutive day yet their daily trend structures remains bullish overall. WTI futures closed the week at 64.90 and brent trades at 68.28.

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