European Open: AUD higher after RBA meeting, FTSE to crack 7100?

Asian Indices:

• Australia's ASX 200 index fell by -31.7 points (-0.42%) and currently trades at 7,459.70
• Japan's Nikkei 225 index has fallen by -240.81 points (-0.86%) and currently trades at 27,540.91
• Hong Kong's Hang Seng index has fallen by -248.64 points (-0.95%) and currently trades at 25,987.16

UK and Europe:

• UK's FTSE 100 futures are currently down -16.5 points (-0.24%), the cash market is currently estimated to open at 7,065.22
• Euro STOXX 50 futures are currently down -14 points (-0.34%), the cash market is currently estimated to open at 4,102.62
• Germany's DAX futures are currently down -51 points (-0.33%), the cash market is currently estimated to open at 15,517.73

US Futures:

• DJI futures are currently down -97.31 points (-0.28%)
• S&P 500 futures are currently up 19 points (0.13%)
• Nasdaq 100 futures are currently up 8.5 points (0.19%)

Delta concerns make a comeback on Asian indices:

The spread of the Delta variant weighed on sentiment, with the Hang Seng and STI falling around -0.75%. The Nikkei 225 is currently down -0.8%. The ASX 200 was retraced from its record high, weighed down by falling gold stocks. However, prices are building a level of support just above 7460. And at just -0.2% lower it is relatively unscathed from the coronavirus concerns seen overnight. At the other end of the scale, chipmakers led the KOSPI 200 0.3% higher, although it was the China A50 index which was the top performer rising 0.8% at the time of writing. Futures markets have opened lower in Europe, which points to a soft open for cash markets.

The FTSE 100 traded above 7100 briefly yesterday, yet found resistance at the weekly R1 pivot before handing back some early gains to close at 7082.76. Price action on the daily chart remains choppy overall and it has effectively been ranging between 6800 – 7200 for over 3-months. Yet a bullish trend is forming on the hourly chart as dips continue to get bought, and there is a cluster of support around 7000 which includes the weekly and monthly pivot points. Moreover, a bullish opening Marabuzo candle formed in the first hour of trade above this level to show increased demand. We therefore favour a break to new highs before a break below 7,000 at this stage, with next major resistance at 7100 – 7217.54.

FTSE 350: Market Internals

FTSE 350: 4077.35 (0.70%) 02 August 2021

• 267 (76.07%) stocks advanced and 72 (20.51%) declined
• 49 stocks rose to a new 52-week high, 0 fell to new lows
• 76.64% of stocks closed above their 200-day average
• 59.83% of stocks closed above their 50-day average
• 5.7% of stocks closed above their 20-day average

Outperformers:

• + 56.7%   -  Meggitt PLC  (MGGT.L) 
• + 7.58%   -  Sanne Group PLC  (SNNS.L) 
• + 5.18%   -  Melrose Industries PLC  (MRON.L) 

Underperformers:

• -5.15%   -  ConvaTec Group PLC  (CTEC.L) 
• -4.88%   -  Pearson PLC  (PSON.L) 
• -2.69%   -  Airtel Africa PLC  (AAF.L) 

Forex: AUD stronger on (less dovish than expected) RBA

The RBA meeting was not as dovish as it could have been. Obviously, interest rates were kept at a record low of 0.1%, although there was not an increase in bond purchases as some speculated. They will continue to purchase A$5 billion per week until September and then taper to A$4 billion until at least November. On the assumption that the majority of the population will be fully vaccinated by the end of the year, they expect growth to reach a little over 4% in 2022.

The Australian dollar is now the strongest major of the session as shorts covered, rising 0.6% against CAD and 0.5% against CHF.  At the time of writing AUD/USD has just breached 0.7400 and considering a break above last week’s high.

Canada’s manufacturing PMI slipped to a 4-month low in June, although at 56.5 it remains historically high.  July’s data is released today at 14:30 BST and expectations are for a slight increase to 56.8. Well, that if it misses expectations like it did in the US? With the ISM manufacturing coming in soft its plausible that Canada’s may follow suit. And, as ISM weighed on oil prices and equities and CAD is sensitive to risk sentiment and oil prices, CAD/JPY is in focus should today’s PMI also miss the mark. A break beneath 87.00 assumes bearish continuation.

EUR/JPY is holding above 129.50 support but, given yesterday’s large bearish candle beneath a resistance cluster, we continue to wait for an eventual bearish breakout.

USD/CHF remains in a downtrend on the four-hour chart, although prices are consolidating around 0.9050 / June 4^th highs. It would not be unreasonable to expect a bounce from current levels towards 0.9100 where the weekly pivot and May 13^th are sitting. And it is around such level’s we’d be keen to re-explore potential shorts to target 0.9000.

Oil prices stabilise overnight:

Oil prices steadies overnight after falling over 3% yesterday. Support was found support at the 50-day eMA, yet resistance sits at $72 with the monthly pivot point. So long as prices remain beneath it, we suspect a move to $70 could be on the cards, which in itself is a pivotal level to monitor. But, as we noted in today’s video, the energy sector appears to have seen a swing high using the SPDR select energy ETF as a proxy for the energy sector.

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