- Australia’s ASX 200 futures are down -26 points (-0.35%), the cash market is currently estimated to open at 7322.1
- Japan's Nikkei 225 futures are down -220 points (-0.79%), the cash market is currently estimated to open at 27783.08
- Hong Kong's Hang Seng futures are down -240 points (-0.86%), the cash market is currently estimated to open at 27764.68
European Friday close:
- UK's FTSE 100 index fell -3.93 points (-0.06%) to close at 7008.09
- Europe's Euro STOXX 50 index fell -20.62 points (-0.51%) to close at 4035.77
- Germany's DAX index fell -89.35 points (-0.57%) to close at 15540.31
- France's CAC 40 index fell -33.28 points (-0.51%) to close at 6460.08
US Friday close:
- The Dow Jones fell -299.15 points (-0.86%) to close at 34,687.85
- The S&P 500 fell -32.87 points (-0.76%) to close at 4,327.16
- The Nasdaq 100 fell -113.314 points (-0.77%) to close at 14,681.38
Delta Variant Weighed on Global Equities:
Global equities traded lower last week as the spread of the Delta variant fanned fears of renewed lockdowns, despite the accelerations of vaccinations. Parts of the US reinstated mask wearing on Friday,
MSCI’s all world index fell -0.62%, and emerging markets were also -0.62% lower. In the US, the S&P 500 fell -0.968% with 8 of its 11 sectors in the red on Friday. Bearish outside weeks formed on Wall Street after three consecutive down days closed the week. With futures markets all pointing lower there is a sense of risk-off at the start of the week.
The ASX 200 remains in its 5-week range, although prices held in the upper third of the range over the past four session. The 20-day eMA is also providing support but we’d need to see a convincing break above 7403 before we can assume trend continuation. Until them range-trading strategies are preferred.
ASX 200 Market Internals:
ASX 200: 7348.1 (0.17%), 17 July 2021
- Consumer Discretionary (0.72%) was the strongest sector and Utilities (-0.39%) was the weakest
- 9 out of the 11 sectors closed higher
- 4 out of the 11 sectors outperformed the index
- 110 (55.00%) stocks advanced, 72 (36.00%) stocks declined
- 69.5% of stocks closed above their 200-day average
- 58% of stocks closed above their 50-day average
- 54% of stocks closed above their 20-day average
- + 4.35% - Whitehaven Coal Ltd (WHC.AX)
- + 4.05% - NEXTDC Ltd (NXT.AX)
- + 3.75% - NRW Holdings Ltd (NWH.AX)
- -5.25% - Evolution Mining Ltd (EVN.AX)
- -4.03% - Mesoblast Ltd (MSB.AX)
- -3.32% - Hub24 Ltd (HUB.AX)
Forex: The Japanese yen remains strongest currency in July
We could be off to a slow start this week due to the quiet economic calendar in general, although there is nothing scheduled at all of interest in today’s Asian session. BOE’s Jonathan Haskel speaks at 20:00 AEST on “scarring in the UK economy”.
The US dollar index (DXY) closed above its 50-week eMA for the first time since May 2020. However, gap resistance around 92.80 continues to cap gains so it remains a pivotal area this week.
USD/CAD closed slightly above 1.2600 on the back of strong retail sales, although bulls now need to conquer the 200-day eMA. We therefore see the potential for a technical correction from current levels but the daily trend remains bullish above 1.2422.
USD/CNH could be one to watch. Whilst prices have been oscillating between 6.4513 - 0.6500, support has been found above the 50-day eMA and a Moring Star Reversal pattern formed on Friday (a 3-day bullish reversal pattern).
NZD/CAD hit out first target around its 200-day eMA, thanks to a hawkish RBNZ meeting last week. Whilst BOC tapered later that day RBNZ appear to be the more hawkish of the two central banks.
GBP/AUD also rallied from 1.8500 support on Friday thanks to stronger than expected inflation data and hawkish comments from two BOE members.
Risk-off sentiment saw the Japanese yen remain firm last week, with several yen pairs found resistance around the weekly pivot point before turning lower. AUD/JPY is retesting its 200-day eMA after a pullback into last week’s pivot point. A break below 81.30 suggests trend continuation although take note of support nearby at 90.92. However, EUR/JPY may provide a better reward to risk ratio for bears.
The daily chart has been trending lower since the June high, although support has been found at the April low and the monthly S1 pivot. This leaves potential for a bounce from current levels, although we’d likely need to see stocks bounce higher to confirm any risk-on sentiment for yen pairs. Futures markets are currently saying otherwise. If prices do manage to bounce higher we’d then look for a lower high to form beneath 131.00 for an eventual break through the April low. This would then bring the 200-day eMA and 129.00 handle into focus for bears as an initial target.
From the Weekly COT Report (Commitment of Traders)
From Tuesday 13th July 2021:
- Traders reduced were net-short exposure for a fifth consecutive week to USD $4.2 billion, however they are slightly net-long the dollar against emerging markets by $600 million.
- Net-long exposure to the US dollar index futures contract rose to 14-month high as bears unwound short bets.
- Large speculators flipped to net-long exposure on US 10-year treasuries.
- Net-long exposure to gold futures rose for a second consecutive week.
WTI printed its first bearish week four as concerns over the delta variant and expectations of growing oil supplies took the wind out of bullish sails. However, Friday printed a small bullish doji at its 50-day eMA so its shows the potential for support to build around $70.0.
Gold finally broke above 1818 resistance on Wednesday, yet a subsequent small Doji and bearish engulfing candle took prices back below the breakout level to present an Evening Star Reversal formation (3-bar bearish reversal). The decline halted at trend support projected from low, which provides a pivotal area to focus on at the start of the week.
Silver fell for a second week and just above June’s low. Given the volatility of Friday’s bearish candle below the 50-day eMA, we suspect momentum has now realigned with the bearish move seen at the beginning of June and this now places the 200-day eMA support level under threat of being broken. Therefore, we see a break beneath 25.40 as a bearish trend continuation signal and brings the lows around 24.00 into focus for bears.
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