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

A quick glance at the forex dashboard shows short covering looks like, as a less-dovish-than-expected RBA meeting forced AUD bears to cover.

Charts (1)

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 4th highs. It would not be unreasonable to expect a bounce from current levels towards 0.9100 where the weekly pivot and May 13th 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.


Up Next (Times in BST)





View today’s video: Energy Sector (XLE) Falters at $50 (WTI, TSLA)

Learn how to trade forex

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.


How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log-in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

More from Commodities

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.