The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR MONDAY 21/06/21

  • SPI200 (Sept) overnight futures up 38 pts to 7305
  • SP500 down 55.41 pts to 4166.45
  • NASDAQ Composite down 130.97 points to 14030.38
  • Dow Jones down 533.37 pts to 33290.08
  • FTSE100 down 135.96 pts to 7017.47
  • DAX30 down 279.63 pts to 15448.04
  • GOLD futures US session (Aug) down $10.90 to $1763.90 an ounce
  • COPPER futures US session (Comex July) down $0.0575 to $4.1205 a pound
  • OIL futures US Session (Nymex July) up $0.60 to $71.64 a barrel
  • CRB Index up 1.62 pts to 205.86
  • AUDUSD trading at 0.7479
  • EURUSD trading at 1.1864
  • GBPUSD trading at 1.3810
  • USDJPY trading at 110.2100
  • USD Index US Session (ICE Sep) up 0.452 to 92.325

US indexes ended the session sharply lower into the weekend as investors were spooked by comments of rising interest rates. St Louis Fed Reserve President Bullard said that he was among the seven officials who saw rate increases beginning next year in order to contain inflation. Funny thing is that the 10-year and 30-year Bond market actually ended the session on their highs showing less concern for inflation than the stock market after his comments. Markets were certainty negative on options expiry day and his comments added to the risk off sentiment into the weekend. The DOW closed down 1.58% while the broader SP500 ended down 1.31% and the Nasdaq closed down 0.92% for the session. In Europe, major Indexes started the session on the back foot mostly due to triple witching options expiry. A recent surge in Options trading fueled by droves of retail traders boosted single stock options to record highs this year which made for some action upon expiry as traders had to close positions. Adding to the negative sentiment later in the session was comments from Bullard which extended the losses into the close. The Banking sector took a hit ending down 3% while Energy also came under pressure. The fact that Banking ended lower and not gaining on rate rise talk, may point to options expiry being the main driver of the sessions negative tone.

The USD Index continued to pressure higher as more short sellers were squeezed out of the action on Bullards comments. Many long term traders are still unwinding their short positions as generally the whole world was short USD in some form into the FOMC announcement. Now traders will be assessing the dollar as a yield play against other low yielding currencies going forward if rates will be raised sooner rather than later. Being that the timeframe is so broad, we would expect to see a lot of volatility and range action for a while rather than a bullish move yet. We also do not believe that the rally can be attributed to safe haven buying as bonds have been contained. The EURUSD continued to loose favour with bulls as the dollar rallied. With the US Fed Reserve being one step ahead of the ECB in regards to Monetary policy, sellers are happy to keep the pressure on the Euro. Price held a lower high at 1.1924 which we expect to hold today with bears potentially looking for an extension down to 1.1790 in coming sessions. The GBPUSD was also knocked on the head again as sellers pushed price into 1.3799 into the close on the back of the dollar rally and unexpectedly weak retail sales data. We would expect the level to bring in some buyers today to squeeze out some sellers ahead of the European session later today. If the zone can not hold, then the next key level down is around 1.3670. The AUDUSD could not find any support around 0.7550 and came under fire during the European session as stock markets took a hit. Being a proxy for risk appetite, the Aussie extended on the recent losses into the US close and is struggling to find a level that may entice buyers back into the action. For now, lower highs at 0.7510 are holding the action down in the short term. The USDJPY again saw some choppy action with the Dollar strength being offset with some safe haven YEN buying. Price did spike around the open of the US stock market session to clear out some recent sellers but quickly reversed into the close. Expect more of the same choppy action today but we are biased down especially if stock markets do find a strong bid today and weigh on the USD.

SPOT GOLD was initially rallying before Bullards comments sent the USD higher and triggered further selling into the precious metal. Gold is still acting more like a currency than a hedge against inflation as movements remain correlated to the USD for now. We will be watching to see if buyers soak up selling pressure to provide some support around the 1760 area. Crude Oil were under pressure in Asian and European trade before being ramped higher from the US open. We expect that price will remain in contraction off the highs around 73.00 so will be watching for a further squeeze lower off a lower high around 71.81. Copper continued the pressure lower as bulls remained spooked from news of China trying to cap commodity prices. Longer term buyers continue to take risk off the table as price falls from daily highs around 4.7500. The short term trend down is being anchored at 4.2190 so we will expect to see the pressure down continued as long as this level holds and the USD finds a bid.

Cryptocurrencies saw sellers pressure prices lower in a risk off tone on Friday which flowed over to weekend trading. Bitcoin failed to get a lift from news that Spanish bank BBVA (Banco Bilbao Vizcaya Argentaria) would open a bitcoin trading service to all private banking clients in Switzerland. Bitcoin is currently trading at $35557.50 down 0.93% while Ethereum is at $2253.62 up 3.48% and Ripple is at $0.77578 up 1.22%.

The ASX200 was range bound into the weekend Friday with price failing around 7400 a few times but holding above the 7370 zone. The index ended the session up only 9.9 points to 7368.9 with Energy stocks, Resources and Gold stocks weighing on the action. The IT sector put on a good performance as it continues to take its lead from the US. Rising stocks outnumbered declining ones by 736 to 592 and 425 ended unchanged.

The ASX200 is expected to open down 90/100 points after the SPI200 sank along with the US into the weekend.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Retail Sales 11:30am

EUR German Buba Monthly Report Tentative

EUR ECB President Lagarde Speaks 10:30pm

EUR ECB President Lagarde Speaks 12:15am

USD FOMC Member Williams Speaks 5am

SPI200 INTRADAY LEVELS TO WATCH