Asian Open: Wall Street extends selloff, yet ASX futures point higher
Matt Simpson January 27, 2022 9:56 PM
Futures markets currently suggests that the ASX 200 will defy negative sentiment today, yet unless key resistance levels are cleared it could become a dead-cat bounce.
Thursday US cash market close:
- The Dow Jones Industrial fell -129.64 points (-0.38%) to close at 34,168.09
- The S&P 500 index fell -23.42 points (-0.54%) to close at 4,326.51
- The Nasdaq 100 index fell -169.648 points (-1.2%) to close at 14,003.11
- Australia's ASX 200 futures are up 101 points (1.51%), the cash market is currently estimated to open at 6,939.30
- Japan's Nikkei 225 futures are up 330 points (1.26%), the cash market is currently estimated to open at 26,500.30
- Hong Kong's Hang Seng futures are up 34 points (0.14%), the cash market is currently estimated to open at 23,841.00
- China's A50 Index futures are down -9 points (-0.06%), the cash market is currently estimated to open at 15,015.56
Red remained the colour of the day yesterday, with Asian, European and US indices extending their post-FOMC losses. It seems equity traders are finally taking the Fed hike seriously and factoring in the prospects of squeezed profit margins as their debt payments are about to become more expensive. The Russell 2000 (small caps) fell -2.3% and the Nasdaq fell a further -1.2%. Despite this, futures markets across Asia point towards a higher open today, at which point we will find out whether a reversal is underway or bears simply stap back in at higher prices.
ASX200 – Remember, volatility cuts both ways
You’d think that the lead from Wall Street doesn’t bode well for the ASX 200 today, yet futures markets are pointing to a gap higher. And, at the same time, its move lower does look over-extended. And bears late to the picnic would be wise to remember that volatility cuts both ways, especially during such bearish moves where prices can easily whipsaw against bears, despite a negative narrative. The ASX 200 is currently down around -11% from its year-to-day high, making it its worst month since March 2020 and 8% of those losses have occurred over the past four days. So whilst it could easily crash and burn today, we’re mindful that equities are not playing nicely at the moment so wider stops and lower levels of exposure are always an option.
ASX 200: 6838.3 (-1.77%), 26 January 2022
- Energy (2.11%) was the strongest sector and Information Technology (-4.95%) was the weakest
- 2 out of the 11 sectors closed higher
- 9 out of the 11 sectors closed lower
- 4 out of the 11 sectors outperformed the index
- 156.6 (76.92%) stocks advanced, 9 (4.42%) stocks declined
- +8.81% - Beach Energy Ltd (BPT.AX)
- +4.45% - AusNet Services Ltd (AST.AX)
- +3.57% - Santos Ltd (STO.AX)
- -11.3% - Evolution Mining Ltd (EVN.AX)
- -9.85% - WiseTech Global Ltd (WTC.AX)
- -9.66% - Zip Co Ltd (Z1P.AX)
King dollar remains leader of the pack
The US dollar retained its grip on the currency markets and traded higher against all major currencies. The US dollar rose to an 18-month high during its most bullish session in 11-weeks, which saw EUR/USD close firmly below the 1.12 handle for the first time since June 2020. As things stand the euro is on track for its most bearish month in seven. USD/JPY closed above 115 in line with our bias from yesterday’s Asian open report and appears set to reclaim 116 near the YTD highs as it tracks US-JP yield differentials higher.
The Aussie and Kiwi were the weakest majors which saw AUD/USD fall to just 20 pips above 70c. It appears to be only a matter of time before the key level is challenged, which leaves the question as to which side of this milestone level it will close the week today.
Gold falls below 1800, silver selloff accelerates
The combination of a strong dollar and rising real rates forced the yellow metal back below 1800 during a second day of turbulent selling. Whilst we suspect gold will shine again, momentum is clearly pointing lower over the near-term as bears have their fun within a multi-month triangle formation. A downside break of the August trendline could shake things up but, for now at least, we suspect selling pressures could subside as we approach 1790.
Bearish momentum for silver accelerated during its worst session since September. It has closed lower for five consecutive days although support was found at 22.60 and trend support from the December low is also nearby.
Up Next (Times in AEDT)
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.