The Morning Jumpstart Macro View

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

  • SPI200 (Sept) overnight futures up 49 pts to 7210
  • SP500 up 64.57 pts to 4323.06
  • NASDAQ Composite up 223.90 pts to 14498.88
  • Dow Jones up 549.95 pts to 34511.99
  • FTSE100 up 36.74 pts to 6881.13
  • DAX30 up 83.07 pts to 15216.27
  • GOLD futures US session (Aug) up $1.00 to $1810.20 an ounce
  • COPPER futures US session (Comex Sept) up $0.0573 to $4.2588 a pound
  • OIL futures US Session (Nymex Aug) up $1.00 to $67.42 a barrel
  • CRB Index up 3.40 pts to 208.99
  • AUDUSD trading at 0.7331
  • EURUSD trading at 1.1782
  • GBPUSD trading at 1.3624
  • USDJPY trading at 109.8500
  • USD Index US Session (ICE Sep) up 0.082 to 92.982

US indexes rallied hard as traders went bargain hunting from the open to wipe off most of the previous sessions losses. It seems that positive sentiment was revived overnight and economic optimism was again the theme of the session as some positive earnings and housing data got bulls out of hiding. All three major Indexes rallied more than 1% with economically sensitive stocks outperforming the broader market. The positive sentiment was supported by a bounce in Bond Yields as Bond prices fell through the US session…but only after being ramped into the US open. The fall in yields helped the banking sector rally 2.6%. The move in yields was potentially just an unwind of the safe haven buying from the previous session as shares rallied from the open but the general trend remains up in bonds as longer term bulls re-adjust for the Feds inflation narrative and close aggressive short positions. With earnings now in full stride, 91% of the 56 companies who have reported, have beaten estimates so it seems the weak economic growth fears from the previous session are unfounded. The DOW closed up 1.62% while the broader SP500 ended up 1.52% and the Nasdaq closed up 1.57% for the session. In Europe, major Indexes also bounced back from the previous sessions weakness but not with the same vigour as the US. Major indexes opened stronger and then retested lows before rallying into the close once the US session got under way. Bulls were helped by a handful of positive earnings and positive production updates from some big miners. Concerns over the Delta variant may be easing as data shows that UK broad-based vaccinations are keeping hospitalisation rates there low despite the sharp jump in COVID-19 infections.

The USD Index continued to trend higher as buyers support dips but we do not expect it is due to any safe haven buying but more of price trending into test resistance as traders lean towards buying dollar denominated assets. Bulls have also been helped by the unwinding of speculative short trades on inflation concerns so part of the move up is attributed to a short squeeze. Expecting to see the dollar index hold a higher low above 92.820 for a push into 93.300. The EURUSD continued to be pressured down although buyers remain adamant that support around 1.1760 will hold as they soak up the selling for now. Bulls will need to defend the level and build a higher low for a squeeze up through 1.1800 that will drag in more buyers and fend off a bigger move lower. The GBPUSD was again hit lower from the open of European trade as the bears continued to batter stubborn bulls. Price easily cleared the 1.3670 support zone to trigger a wave of stop losses before bouncing slightly into the close. We expect to see some back and fill and a squeeze on sellers as price is extended lower. The AUDUSD easily held under support and did not find much of a ‘risk on’ bid once the US share market opened and rallied back. Price is being held down at 0.7355 and we expect that, until this level is broken, price will remain heavy. The USDJPY rallied as some safe haven YEN bulls closed positions on a short squeeze into the pair. The key level remains up at 110.340 but we will be watching an inside level at 110.020 to see if sellers are still active or whether we can expect to see a basing period for a run higher.

SPOT GOLD was moving its way higher through European trade until sellers stepped in at the open of US trade and pushed price back down to the 1810 area. We expect that buyers may still have some work to do before seeing a continuation move higher. If the 1805 level can hold today, we expect to see another grind higher. Crude Oil managed to fend off another bout of selling around the 66.50 zone although the action is not looking too convincing from the bulls. The pressure of more production is expected to weigh on the action for longer as bulls battle with continued demand pressure and concern over increasing covid cases weighed on economic growth…so all eyes will be on data releases. Copper managed to fend off the selling pressure through European trade and hold a higher low before being ramped up on the open of the US session. Price consolidated the gains into the US close so we may see more support through Asian trade today as shorts are squeezed and buyers get excited.

Cryptocurrencies remain under pressure as the squeeze lower continues. Bitcoin broke back down below the 30,000 level which no doubt is stretching bulls patients. Bitcoin is currently trading at $29709.8 down 3.37% while Ethereum is at $1787.10 down 1.79% and Ripple is at $0.53117 down 4.81%.

The ASX200 took another hit on the open yesterday but again managed to limit the losses into the close to remain in the previous months range. The index ended the day well up off the session lows down 33.8 points to 7252.2 with Metals and Mining, Resources and Utilities stocks being hit the hardest while Healthcare and IT ended in the green. Falling stocks outnumbered advancing ones by 968 to 391 and 392 ended unchanged.

The ASX200 is expected to open up 50 points after the SPI200 held support and ramped higher along with a bullish US session.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Retail Sales 11:30am

GBP Public Sector Net Borrowing 4pm

USD Crude Oil Inventories 12:30am

SPI200 INTRADAY LEVELS TO WATCH