Asian Open: Is the US dollar index headed for 100?

US Friday close:

• The Dow Jones rose 153.34 points (0.44%) to close at 34,861.24
• The S&P 500 rose 22.9 points (0.51%) to close at 4,543.06
• The Nasdaq 100 fell -11.386 points (-0.08%) to close at 14,754.31

Asian Indices:

• Australia’s ASX 200 index closed at 7,406.20 on Friday
• Japan's Nikkei 225 index closed at 28,149.84 on Friday
• Hong Kong's Hang Seng index closed at 21,404.88 on Friday
• China'sA50 Index closed at 13,529.79 on Friday

European Friday close:

• UK's FTSE 100 index rose 15.97 points (0.21%) to close at 7483.35
• Europe's Euro STOXX 50 index rose 4.34 points (0.11%) to close at 3867.73
• Germany's DAX index rose 31.97 points (0.22%) to close at 14305.76
• France's CAC 40 index fell -2.09 points (-0.03%) to close at 6553.68

The Nasdaq 100 has produced the strongest rebound from this month’s low, of around 13% (compared to 9.4% on the S&P 500 and 8.3% on the Dow Jones). Yet a bearish hammer formed on Friday which shows a hesitancy to push immediately higher, even if it did closed just above its 200-day eMA for a second consecutive session. But Wall Street clearly outperformed it European counterparts last week, with the DAX and STOXX stuck in sideways ranges. The China A50 and Hang Seng have turned lower which begs the question as to whether they have seen their respective highs. And weekend reports that Shanghai will go into lockdown could weigh further on stocks in the region today.

Lockdowns to hit parts of China

Part of Shanghai are to be locked down for a period which spans nine days to carry out COVID-19 testing. Public transport will be suspended and only approved vehicles will be allowed to travel, whilst firms and factories will also suspend manufacturing work. On Saturday it reported 2,631 new cases and accounted for around 60% of new asymptomatic cases for the day, alongside 47 with symptoms. 

The Hang Seng fell to a 7-day low on Friday and closed beneath tis 50-day eMA for a second day. It held above the March 2021 low on Friday but is a level which may well get challenged today.

ASX 200:

The ASX 200 closed above 7400 on Friday for the first time since mid-January. The materials, utilities and energy sectors were the strongest performers last week, and all rose of 5% whilst the healthcare sector was the worst performer (and on of the two sectors to fall) and traded -2.5% lower. Given Friday’s upper wick accounts for around half of the day’s range then we wouldn’t be too surprised to see prices pullback or consolidate, so we’d look for the 7340/58 range to hold as support.

ASX 200: 7406.2 (0.26%), 25 March 2022

• Materials (1.29%) was the strongest sector and Health Care (-0.82%) was the weakest
• 7 out of the 11 sectors closed higher
• 4 out of the 11 sectors closed lower
• 6 out of the 11 sectors outperformed the index
• 135 (67.50%) stocks advanced, 53 (26.50%) stocks declined

Outperformers:

• +9.46% - Coronado Global Resources Inc (CRN.AX)
• +5.09% - BlueScope Steel Ltd (BSL.AX)
• +4.81% - Brickworks Ltd (BKW.AX)

Underperformers:

• -5.43% - Dicker Data Ltd (DDR.AX)
• -4.50% - Novonix Ltd (NVX.AX)
• -3.92% - Meridian Energy Ltd (MEZ.AX)

AUD, NZD and CAD lead the way in March

Commodity currencies remain the strongest majors month to date, led by AUD and NZD. The yen is by far the weakest after the BOJ reiterated their ultra-loose monetary policy stance will remain in place for some time.

On Friday we outlined our bearish bias on EUR/GBP due to a cluster of resistance around 0.8360. Whilst prices initially broke above this level, the 50-day eMA capped as resistance and the day closed with a bearish hammer which is also an outside day. A potential bear flag is forming on the four-hour chart around Friday’s low and the interim target remains 0.8300.

DXY headed for 100?

The US dollar index (DXY) remains in a strong uptrend on the daily chart, although prices have spent the best part of March oscillating sideways. But the 20-day eMA has provided dynamic support and a double bottom at 97.712 forms part of a higher low. Friday’s candle produced a potential bullish hammer which shows demand below the retracement line. We’re now looking for a break above 98.965 to signal a resumption of its uptrend and head towards 100, with the 99.42 high being a likely interim target.

 

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