The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR WEDNESDAY 14/07/21 (as at 7:15am AEST)

  • SPI200 (Sept) overnight futures up 4 pts to 7255
  • SP500 down 15.42 pts to 4369.21
  • NASDAQ Composite down 55.59 pts to 14677.65
  • Dow Jones down 107.39 pts to 34888.79
  • FTSE100 down 0.70 pts to 7124.72
  • DAX30 down 0.87 pts to 15789.64
  • GOLD futures US session (Aug) up $1.80 to $1807.70 an ounce
  • COPPER futures US session (Comex Sept) down $0.0245 to $4.2915 a pound
  • OIL futures US Session (Nymex Aug) up $1.15 to $75.25 a barrel
  • CRB Index up 1.41 pts to 214.12
  • AUDUSD trading at 0.7447
  • EURUSD trading at 1.1776
  • GBPUSD trading at 1.3814
  • USDJPY trading at 110.6200
  • USD Index US Session (ICE Sep) up 0.534 to 92.790

US indexes ended the session lower after the broader market hit new all time highs just after the open. Traders initially looked past the higher than expected inflationary data as tech stocks, which typically come under pressure on higher interest rate concerns, were strong from the open. It wasn’t until later in the session when Indexes turned negative and pushed down into the close as the data weighed. It seems that the market is still attributing the higher inflation data to the recovery out of the Pandemic but all eyes will be on Powells testimony to Congress tonight. The bond market reacted lower to the CPI release and ended on the lows for the session. The 10 and 30-year Bond auctions showed less enthusiasm from investors from previously as both the yield and demand levels were lower. The result may be showing that expectations are increasing for further inflationary pressure which will then pressure the interest rate rise narrative. Still, most will expect that the Fed will stick to their guns and maintain its ultra easy monetary policy stance for a while. The DOW closed down 0.31% while the broader SP500 ended down 0.35% and the Nasdaq closed down 0.38% for the session. In Europe, major Indexes were flat for the session with Banks supporting the major Indexes after the Bank of England scrapped pandemic restrictions on dividends from the top lenders. The ECB said that they are going to be ‘persistent’ and not repeat past mistakes of tightening policy too early. Earnings from JPMorgan and Goldman Sachs saw ‘buy the rumour, sell the fact’ trading as both beat estimates but ended lower on a less rosy outlook thanks to low interest rates.

The surge in the CPI data was largely attributed to a jump used cars and trucks which accounted for more than one-third of the surge in prices reported by the Labor Department. Demand has mostly been driven by rental companies who are desperate to restock after offloading their fleets at the height of the pandemic. This factor is expected to cool off leaving the CPI increase temporary, playing into the ‘transitory’ theme.

The USD Index spiked after the CPI data release to squeeze out some recent sellers. Price moved straight back up and into resistance where we will be watching for some selling pressure to cap the gains. We expect that many traders will hold off on new bets ahead of the Powell testimony tonight. If buyers continue to grind price higher today, then expect major currency pairs, such as the Euro, to take a hit as a rally will open the door to a move up to and through 94.000 in the medium term. The EURUSD moved straight back down on the back of the dollar strength, to flush out previous lows at 1.1780. The move down may be running out of steam as we would not expect to see any major short sellers to enter the market down at current levels. Price may squeeze lower in the Asian session but we do expect to see support above 1.1760. The GBPUSD also came under pressure on the dollar rally although buyers did show some strength to stem the tide of selling pressure above 1.3800. Expect that bears will look to further flush some buyers out of the action ahead of the European session open. The AUDUSD took a hit over the US CPI data release to spike below the 0.7448 low. Price did recover and is currently hovering around the zone as share Indexes hold up. Price did weather the USD rally well but sellers will be eager to see price test to 0.7420 if buyers can not hold the 0.7442 zone. The USDJPY was initially capped at 110.440 before a spike through the level on the CPI release. Price continued the push higher into the US close potentially targeting 110.800 today.

SPOT GOLD was again a mixed bag with choppy action as price loves to trap traders in the range bound market. Price spiked lower on the CPI release before rallying straight back up and settling just below the 1810 zone. There is a distinct lack of conviction from both buyers and sellers although the market is edging higher. Expecting to see the 1810 level cap rallies while 1800 support the market today. Crude Oil moved higher, after being supported around 73.68, to push up through 74.86 resistance. Bulls were supported by comments from the International Energy Agency (IEA) that the market should expect tighter supply for now due to disagreements among major producers over how much additional crude to ship worldwide. Price started to consolidate above the 75 mark which we expect to see continue today, or a slow grind lower, ahead of the Europe open. Copper chose to move lower off 4.3535 resistance as the dollar rally pressured bulls. Price did reject lows into 4.2500 so we will be watching to see if the secondary flush lower is enough to bring in some interest from buyers to hold a higher level above 4.2500.

Cryptocurrencies added to their losses generally across the board with Ethereum leading the move lower. Bitcoin is into a key support level which will need to hold today to fend off a bigger selloff while Ethereum could easily take another hit today as it holds a down trending move. Bitcoin is currently trading at $32566.2 down 0.92% while Ethereum is at $1944.72 down 4.19% and Ripple is at $0.61895 down 1%.

The ASX200 continues to be stuck in a range that it has been in a few weeks now as price fell away from the opening highs yesterday to end down 1.4 points to 7332.1. Price struggled to get any momentum up as sellers once again capped the action into 7380. Stocks in the Energy, Financial and Gold sectors weighed most on the action while Industrials and Utilities helped to provide some support. Rising stocks outnumbered declining ones by 735 to 595 and 410 ended unchanged.

The ASX200 is expected to open up 5 points in a lackluster start to the session after the SPI200 was range bound overnight.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Westpac Consumer Sentiment 10:30am

NZD RBNZ Rate Statement and Cash Rate 12pm

JPY Revised Industrial Production 2:30pm

GBP CPI and PPI Data 4pm

USD PPI Data 10:30pm

CAD BOC Rate Statement and Overnight Rate 12am

USD Crude Oil Inventories 12:30am

USD Fed Chair Powell Testifies 2am

USD Beige Book 4am

SPI200 INTRADAY LEVELS TO WATCH