Asian Open: Equities Extend Losses as Fed moves Closer to Tapering
Matt Simpson August 18, 2021 5:50 PM
Whilst divisions remain among the ranks, the Fed minutes revealed ‘most members’ are on board to taper which pushed already-fragile equity markets lower in the last hour of trade.
- Australia's ASX 200 futures are down -49 points (-0.66%), the cash market is currently estimated to open at 7,453.10
- Japan's Nikkei 225 futures are down -200 points (-0.72%), the cash market is currently estimated to open at 27,385.91
- Hong Kong's Hang Seng futures are up 43 points (0.17%), the cash market is currently estimated to open at 25,910.01
UK and Europe:
- UK's FTSE 100 index fell -11.79 points (-0.16%) to close at 7,169.32
- Europe's Euro STOXX 50 index fell -6.98 points (-0.17%) to close at 4,189.42
- Germany's DAX index rose 44.02 points (0.28%) to close at 15,965.97
- France's CAC 40 index fell -49.73 points (-0.73%) to close at 6,770.11
Tuesday US Close:
- The Dow Jones Industrial fell -108 points (-3.8259%) to close at 34,960.69
- The S&P 500 index fell -47.81 points (-1.08%) to close at 4,400.27
- The Nasdaq 100 index fell -144.903 points (-0.97%) to close at 14,857.92
Equity selloff accelerates on the ‘T’ word
The Fed minutes revealed that most members were on board for tapering this year, yet divisions remain over the labour market recovery. You can read Matt Weller’s FOMC minutes review here, but on the surface it seems they’re dragging it out to unveil their plans at the Jackson Hole symposium in two weeks.
Equities were broadly lower with most of their losses materialising at the last hour of trade. Whilst US retail sales and consumer confidence may have had some investors erring on the side of caution, the taper word was enough to prompt more aggressive profit taking just off record highs and as earnings season wound down.
All major US benchmarks fell around -1% and closed below their 20-day eMA. 10 of the S&P’s sectors were in the red, led by energy and tech stocks. The Nasdaq biotech fell -1.3% and value stocks were also weak performers on the S&P 500 and Russell 2000.
The ASX 200 has fallen for 3 consecutive sessions, bearish momentum is waning and yesterday’s Doji closed above the 20-day eMA and monthly R1 pivot. However, futures markets point to a weak open around 7448 support, so how prices react around this support level early on could be key for how the day plays out. Should bears remain in control then 7400 is the next line of defence for bulls.
ASX 200 Market Internals:
ASX 200: 7502.1 (-0.12%), 18 August 2021
- Real Estate (1.8%) was the strongest sector and Materials (-2.97%) was the weakest
- 7 out of the 11 sectors closed higher
- 128 (64.00%) stocks advanced, 60 (30.00%) stocks declined
- 68% of stocks closed above their 200-day average
- 100% of stocks closed above their 50-day average
- 100% of stocks closed above their 20-day average
- + 15.66% - Pro Medicus Ltd (PME.AX)
- + 7.13% - Domino's Pizza Enterprises Ltd (DMP.AX)
- + 6.13% - Domain Holdings Australia Ltd (DHG.AX)
- -7.07% - BHP Group Ltd (BHP.AX)
- -5.84% - Sims Ltd (SGM.AX)
- -4.82% - Bapcor Ltd (BAP.AX)
Forex: Delta weighs on NZD, AU employment up next
The New Zealand dollar retained its place as the weakest major currency after daily new cases rose to 10, and RBNZ held rates against market consensus. Over the near-term, higher cases likely means a lower NZD but, should new cases begin to fall the Kiwi dollar likely makes an attractive long for bulls as RBNZ did give a ‘hawkish pause’ yesterday.
The Canadian dollar also traded lower despite hotter than expected inflation, which rose 3.7% YoY in July which is its fourth month above the upper bound of BOC’s 2-3% target range. Lower oil prices proved to be the main drag on CAD pairs.
The US dollar index (DXY) nudged its way toa 4-month high yet closed with an indecision candle. Technically we expect 93.43 to be a tough nut to crack initially, so the dollar strength may just abate and allow gold to break higher and lift EUR and AUD from its lows.
EUR/JPY performed a countertrend bounce in line with our near-term bias yesterday, stopping just shy of 1.29 before rolling over to form a bearish engulfing candle on the four-hour chart. GBP/AUD reach our 1.9000 target.
AUD/USD fell to its lowest point since November although there is a technical argument for a pause in trend; both the monthly S1 and weekly S3 pivots are sat right on the 0.7220 low. Keep an eye on AU employment up later today though as it likely to be the deciding factor as to which side the support level the Aussie closes on today.
Australia releases employment data for July at 11:30 AEST. Given the RBA said they were “ready to act” if required in their August minutes, it leaves the Australian dollar vulnerable to bearish eyes should the data disappoint more than already expected. Due to the states of Victoria and New South Wales remaining in extended lockdowns, unemployment is expected to rise for the first month in 8 (to 5% from 4.9%) and -42.5k jobs are expected to have been shed.
Learn how to trade forex
Commodities fell for a fourth day to a 6-day low, according the CRB commodity basket.
Oil prices were lower for a fifth day as demand concerns lingered as covid cases continued to rise whilst fresh supply hits the markets. WTI was down -1.96% to a 3-month low and fell throughout most of the US session.
Gold stood up to do dollar strength yet traded sideways for a 2nd session, just off its 7-day highs and below its 200-day eMA and 1800. Something has to give at some point and should dollar strength wane then we could find it helps gold break higher.
Up Next (Times in AEST)
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
- Open a Forex.com account, or log-in if you’re already a customer.
- Search for the pair you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.