Asian Open: Peace talks weigh on commodities, AUD and NZD

Monday US cash market close:

• The Dow Jones Industrial fell 105 points (0%) to close at 32,945.24
• The S&P 500 index rose -31.2 points (2.51%) to close at 34,058.75
• The Nasdaq 100 index fell -255.19 points (-1.92%) to close at 13,046.64

Asian futures:

• Australia's ASX 200 futures are down -61 points (-0.85%), the cash market is currently estimated to open at 7,088.40
• Japan's Nikkei 225 futures are up 10 points (0.04%), the cash market is currently estimated to open at 25,317.85
• Hong Kong's Hang Seng futures are down -526 points (-2.69%), the cash market is currently estimated to open at 19,005.66
• China's A50 Index futures are down -141 points (-1.07%), the cash market is currently estimated to open at 13,222.62

A fourth round of peace talks between Ukraine and Russian officials were held via video link overnight. Whilst they’re yet to produce any solid results, they are deemed as step in the right direction and hope remains a resolution can be found. And those hope have removed a key pillar of support for commodity prices which surged last week on supply disruption.

The US piled the pressure on China during ‘intense’ meeting in Rome to not provide military aid to Russia, with the White House warning of ‘significant consequences’ if they do. Yet despite these positive developments, Wall Street traded lower as investors were allowed to refocus their negative energy on the prospects of multiple Fed hikes.

Peace talks weigh on commodities

WTI slipped to $100, meaning it has fallen over -23% from its 14-year high set last Monday. And with that we’re now seeing calls for $50 oil – just one week after seeing calls for $200. We think both of these scenarios are far-fetched, but over the neat-term it could range around $90 - $110.

Gold fell to a 6-day low and is now down around -5.8% from last week’s high. Yet in context of its 16.4% rally from the January low, it could still be part of a healthy pullback. And trader positioning last week showed that large speculators and managed funds remain long the metal, and we doubt they’ve all gone scrambling for cover because of a small retracement.

ASX 200:

The ASX printed a gain with conviction yesterday, by opening at the day’s low and closing at the high. And with despite a weaker lead from Wall Street we suspect it can defy gravity, as it generally has done these past two weeks, and challenge 7200 today.

ASX 200: 7149.4 (1.21%), 14 March 2022

• Financial (2.46%) was the strongest sector and Materials (-0.34%) was the weakest
• 10 out of the 11 sectors closed higher
• 1 out of the 11 sectors closed lower
• 6 out of the 11 sectors outperformed the index
• 147 (73.50%) stocks advanced, 43 (21.50%) stocks declined

Outperformers:

• +7.39% - Latitude Group Holdings Ltd (LFS.AX)
• +6.56% - Pendal Group Ltd (PDL.AX)
• +6.16% - Virgin Money UK PLC (VUK.AX)

Underperformers:

• -7.47% - Paladin Energy Ltd (PDN.AX)
• -4.41% - Chalice Mining Ltd (CHN.AX)
• -4.17% - Nickel Mines Ltd (NIC.AX)

Euro rallies on peace talk hopes

Sometimes, a little can go a long way and that appeared to be the case with the stronger euro overnight. Rising across the board, euro printed bullish outside days against all majors. The US dollar was the second strongest major and traded higher against all majors except the euro, as traders refocussed on the prospects of multiple rate hikes.

AUD and NZD were dragged down with commodities and the stronger US dollar. NZD/USD fell to a 2-week low in line with yesterday’s bearish bias, and our target remains either 0.67 or trend support from the January low (whichever comes first). USD/JPY closed above 118 for the first time since January 2017 and is less than a day’s trade away from hitting a 6-year high.

If commodities continue to weigh on the Aussie and traders remain bid the dollar, a break of trend support seems inevitable. Bearish momentum is also on its side having formed a lower high and strong impulsive move lower. Still, there chance of a ounce back above 72c but, as long as prices remains beneath the 0.7240 support zone, our bias remains bearish and for a run towards 0.7100. Whereas a break above 0.7245 invalidates our bearish bias and assumes the trendline remains valid.

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