The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR FRIDAY 18/06/21 (as at 7:15am AEST)

  • SPI200 (Sept) overnight futures up 38 pts to 7305
  • SP500 down 1.84 pts to 4221.86
  • NASDAQ Composite up 121.67 points to 14161.35
  • Dow Jones down 210.22 pts to 33823.45
  • FTSE100 down 31.52 pts to 7153.43
  • DAX30 up 17.10 pts to 15727.67
  • GOLD futures US session (Aug) down $82.90 to $1778.50 an ounce
  • COPPER futures US session (Comex July) down $0.2120 to $4.1730 a pound
  • OIL futures US Session (Nymex July) down $1.11 to $71.04 a barrel
  • CRB Index down 5.93 pts to 204.24
  • AUDUSD trading at 0.7555
  • EURUSD trading at 1.1907
  • GBPUSD trading at 1.3924
  • USDJPY trading at 110.2600
  • USD Index US Session (ICE Sep) up 0.702 to 91.910

US indexes were mixed with the DOW and broader market SP500 ending lower while the tech heavy Nasdaq closed higher. The fact that tech stocks supported the overall market suggests that a lot of what the Fed said in yesterdays FOMC statement was already factored in as tech has recently come under pressure on inflation concerns. Shares in Apple, Microsoft, Facebook and Amazon all reversed pre-market weakness as traders focused on the economic rebound and increasing demand rather than rate rises two years down the track. US 10-year bond yields fell as bonds rallied to support the view that the Fed has said nothing that the market already did not know and will happily keep support in place. Unemployment claims out overnight supports the Fed as they came in higher than expected showing the labour market still has some way to go to meet the Feds expectations. The bond price reversed a lot of the previous sessions losses to lift up off support which suggests that the dollar rally may be over extended in the near term. The DOW closed down 0.62% while the broader SP500 ended down 0.04% and the Nasdaq closed up 0.87% for the session. In Europe, major Indexes were again mixed with the DAX erasing early weakness to end higher while the FTSE could not bounce back and held the lows into the close. Mining stocks were the biggest drag on the indexes as commodity prices tumbled while Bank stocks helped to provide support.

The USD Index again moved higher in what looks like a good short squeeze as sellers are being forced to lock in some gains. There are a lot of sellers stacked up that will be feeling the pinch as the pressure is applied while 10-yr bonds rallied off previous sessions lows which also suggests its a squeeze. With the unemployment data coming in higher than expected, we may see some heat come out of the recent rally although there are no early signs yet of momentum slowing. The EURUSD dropped another 100 pips on the back of the USD strength as a lot of recent buyers had to unwind bullish bets. The Euro had no problem pushing through the 1.2000 area to extend on the losses. Price is well and truly extended but with the current negative sentiment towards the pair, the move lower could easily be exacerbated if the squeeze on the USD continues. The GBPUSD also added to the recent losses as European FX traders played catchup with the selloff in the previous US session. Price continues to hold minor lower highs and may be targeting a move below the 1.3860 area….for now the bias remains down until something halts the USD rally. The AUDUSD also took another hit on the USD movement as price pushed straight down through support at 0.7590 and tested previous lows around 0.7550. We expect that there may be a reaction from buyers after a flush lower of the level but will not be holding our breath just yet as bulls will have a lot of work to do. The USDJPY strangely did not show the strength that would have been expected on the back of the USD rally. Instead, price moved lower which could partially be attributed to some YEN strength but it was more of a reaction to the fall in US bond yields. The move lower may be a heads up that the USD rally is running out of steam and may reverse some of the gains.

SPOT GOLD took another beating on the back of the continued strength into the USD…which China will be happy with as commodities fall. Gold started the march lower right from the European session open and easily cleared lows at 1810. We expect that prices are extended but are happy to stay on the sidelines until buyers show more conviction…or at least sellers show a lot less. Crude Oil also took a major hit on the back of the unwinding of the ‘reflation’ trade as the dollar rally prompted some risk off into the commodity. Price did manage to limit the losses into the close but did break the recent uptrend so we expect to see some contraction lower in the near term as price holds lower highs. Copper also felt the brunt of the dollar selloff as price pushed straight down into potential support around 4.1745. If this level can not hold and bring in some interest from bulls, expect to see an extended move down to test towards the 4.0000 zone.

Cryptocurrencies again saw some negative sentiment as the rise in the USD saw sellers edge into the action although prices held up relatively well considering the strength of the dollar rally. Bitcoin is currently trading at $37751.7 down 2.60% while Ethereum is at $2344.30 down 1.83% and Ripple is at $0.83662 down 0.02%.

The ASX200 managed to fight back from some earlier session weakness yesterday and minimise the losses into the close. The index ended down 27.2 points to 7359 with the Gold sector coming under the most pressure ending down 4.03%. Next in line for bears was Metals and Mining and then Resources while IT and Financials provided support to the market. Falling stocks outnumbered advancing ones by 972 to 416 and 393 ended unchanged.

The ASX200 is expected to open up 40 points after the SPI200 pushed back up to retest highs overnight after a lackluster day session.

ECONOMIC DATA OUT TODAY (AEDT)

JPY Monetary Policy Statement Tentative

JPY BOJ Policy Rate Tentative

EUR German PPI 4pm

GBP Retail Sales 4pm

JPY BOJ Press Conference Tentative

EUR Current Account 6pm

SPI200 INTRADAY LEVELS TO WATCH