Market summary
- The RBA held interest rates at 4.1%, which came as a surprise to the half who expected a hike, weighed initially on AUD and sent the ASX 200 to an 8-day high
- Yet the initial reaction was short-lived, with the Aussie quickly recouping all losses and trading higher as came around to the hawkishness of the pause, with the statement reiterating “inflation remains too high” and “some further tightening of monetary policy may be required”
- Trading volumes should hopefully become replenished as US traders return from their independence day holiday weekend, and US economic data returns to the menu (durable goods orders, factory orders and the FOMC minutes are released overnight, ADP employment, initial claims, job layoffs and ISM services on Thursday then Nonfarm payroll on Friday)
- European bourses retraced for a second day following Friday’s ‘soft-inflation’ rally, during quiet trade due to the US holiday
- Later today we’ll look to see if the DAX can hold above 16k (give or take) for a potential swing-trade long
- Gold rose for a fourth day, although gains were on the cautious side and likely require softer US employment data to help extends its rally above $1950
- A bullish inside formed on WTI crude oil, but due to bearish positioning of large speculators we’re seeking to fade into rallies around potential resistance levels
- A weak set of China PMIs could help with a bearish oil bias today
Events in focus (AEDT):
- 09:00 – Australian manufacturing and construction index, services PMI
- 10:30 – Japan’s services PMI
- 11:30 – Australia retail sales (revised)
- 11:145 – China services and composite PMI (Caixin)
ASX 200 at a glance:
- The ASX 200 rose for a third day to an 8-day high
- 7300 resistance is within a typical day’s trading range (and likely target today)
- Although with prices rising into resistance with below-average volume, the rally lacks some conviction from bulls
- Intraday support includes 7264, 7241, 7232
- Intraday resistance includes 7285, 7300, 7320
WTI crude 1-hour chart:
We noted in a report yesterday’s European Open report that WTI is likely to remain range-bound given large speculators and managed funds continue to add to their short exposure whilst OPEC support prices. Whilst this could take weeks to play out, the daily chat has produced three lower highs – all with one or two-bar reversal patterns on the daily chart. Yesterday’s rally was on relatively low volumes and stopped below Monday’s high (which formed a bearish hammer on the daily chart and double top on the 1hour chart). A lower high has since formed on the 1-hour chart and momentum is trying to turn lower, hence our bearish bias for the day. The bias remains bearish below 71.50 with an open downside target to just above $70. (Which means $70 is a likely support area, but we’re open to a higher target with lower levels of volatility).
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
