Asian Open: Traders Lay in Wait ahead of US CPI and Earnings

It may have been a slow start to the week but, thankfully, periods of calm are followed by periods of volatility. And this week’s trading calendar is about to get busy.

Charts (1)


Asian Futures:

  • Australia's ASX 200 is currently estimated to open at 6,974.00
  • Japan's Nikkei 225 futures are down -10 points (-0.03%), the cash market is currently estimated to open at 29,528.73
  • Hong Kong's Hang Seng futures are up 37 points (0.13%), the cash market is currently estimated to open at 28,490.28

Monday US Close:

  • The Dow Jones Industrial fell -55.2 points (-0.16%) to close at 33,745.40
  • The S&P 500 index fell -0.81 points (-0.02%) to close at 4,127.99
  • The Nasdaq 100 index fell -25.704 points (-0.19%) to close at 13,819.35

Indices remain soft ahead of US earnings:

Indices were broadly lower as traders booked profits ahead of US earnings season. Small indecision candles appeared across on US indices and only the S&P 500 saw a marginal new high whilst others printed inside candles. The Nikkei and Hang Seng were more convincing with their selloff yesterday, and the latter suggests a swing high is in place. Last week the index produced two Dark Cloud Cover reversal patterns on the daily chart (2-bar reversals) and yesterday’s break beneath 28,500 confirmed a potential swing high.


ASX 200: 6974 (-0.30%), 12 April 2021


Outperformers

  • + 2.42%   -  Cochlear Ltd  (COH.AX) 
  • + 2.39%   -  Nanosonic Ltd  (NAN.AX) 
  • + 2.06%   -  Bank of Queensland  (BPQ.AX) 

Underperformers:

  • -7.72%   -  Nickel Mines Ltd  (NIC.AX) 
  • -4.97%   -  Ramelius Resources Ltd  (RMS.AX) 
  • -4.31%   -  NRW Holdings  (NWH.AX) 


The ASX 200 is forming a potential bull flag formation below 7,000. Having a pause before extending a move can actually be a good thing (when it works) as it can allow traders to increase potential reward to the risk ratio as the consolidation area provides clearer levels to enter (if it breaks out successfully) or exit (if prices reverse).

From here, we’d like to see 6938 support but, if it breaks above 7012 without testing support, it’s arguably a more bullish signal to take note of. Equally, we’d be happy to see a higher low / base build at one of the lower support zones such as 6900/38, or around 6850 before seeking bullish setups.

  • A direct break above 7012 is the most bullish scenario and brings 7100 into focus.
  • Alternatively, bulls could wait to see if a lower support zone prompts a base to form then seek evidence that bullish momentum has realigned with its longer-trend bullish trend before seeking long entries.
  • Should bearish momentum pick up from, its highs then the bullish bias is invalidated.

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Forex: Dollar continues to coil within range

The US dollar index (DXY) remains stuck between the 92.00 – 92.50 range, although the overnight high found resistance at 92.34 at its 20-day eMA. With it being the second indecision candle with lower volatility, compression appears to be underway (which should, at some point, be followed by range expansion).

  • Until we see the dollar breakout, then AUD/USD and NZD/USD are likely to continue to tease us with their potential swing highs yet lack any bearish follow through.  Perhaps CPI could be the trigger for some dollar-related volatility.
  • CAD/JPY dipped slightly beneath Thursday’s hammer high yet remains above its 20-day eMA. If momentum can turn higher form current levels it still allows for a decent reward to risk ratio, in line with yesterday’s analysis. But a 2-bar reversal (Dark Cloud Cover) would be confirmed on the daily chart with a break below 86.76 and remove it form the watchlist.
  • GBP/AUD remains within its bullish channel, yet the two recent bullish days remain within Thursday’s large bearish bar and below the 1.8072 high. A break above resistance / Thursday’s high assumes bullish continuation within the channel, whilst a break beneath 1.7934 / Thursday’s low confirms a bearish breakout of the channel.

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Commodities: Metals lower ahead of inflation data

Higher yields overnight didn’t help much either, with gold, silver, palladium and platinum all lower overnight.

  • Gold dropped to a four-day low yet recovered slightly to settle marginally above Monday’s low. Clearly, bulls are not ready to break this above 1764 but, at the same time, bears aren’t exactly owning the show.
  • Platinum fell to a seven-day low and is testing trendline support from its March low. Given the acceleration of bearish momentum and reluctance to break above 1250, its highly plausible that its correction from February’s high is not yet complete. A break of trendline support brings the lows just above 1100 into focus but, if this is still part of a correction it could move closer to 1000.
  • Conversely, palladium rose to a four-day high and it appears to be carving out an inverted head and shoulders pattern. Is long palladium / short platinum the next big metals trade?

Up Next (Times in AEST)


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.

We have quite a bit of economic data across all regions today, already kicked off by New Zealand.

  • NZIER Business confidence fell from -6 to -13 for Q1 – meaning 13% of respondents expected the economy to deteriorate. Yet expectations for a hike within the next year has risen from 14% to 28%.
  • The at 11:30 we have business confidence and conditions from NAB (National Australian Bank). Given JobKeeper finished recently it will be interesting to see if this has made an impact on the business conditions index. Although given business confidence rose to a 10-month high in February with sales, profits and investment all rising, perhaps these will at least remain at elevated levels.
  • German wholesale prices and the ZEW economic index put euro crosses into focus. For business sentiment we want to see how much impact news that the Federal government are moving towards greater lockdown power in Germany (and, ultimately whether EUR/USD and DXY can break out of their ranges).
  • Then in the US session all eyes are on CPI data. We know the Fed aren’t concerned with rising inflation, but a soft print backs up the Fed’s soft stance and could help propel stocks higher.

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