The Morning Jumpstart Macro view

OVERNIGHT MARKET SNAPSHOT FOR FRIDAY 23/04/21 (as at 8am AEST)

  • SPI200 (Jun) overnight futures down 15 pts to 7010
  • SP500 down 38.44 pts to 4134.98
  • NASDAQ Composite down 131.80 pts to 13818.41
  • Dow Jones down 321.41 pts to 33815.41
  • FTSE100 up 42.95 pts to 6938.24
  • DAX30 up 124.55 pts to 15320.52
  • GOLD futures US session (June) down $9.10 to $1784.00 an ounce
  • COPPER futures US session (Comex May) down $0.0112 to $4.2678 a pound
  • OIL futures US Session (Nymex Jun) up $0.08 to $61.43 a barrel
  • CRB Index up 1.02 pts to 194.68
  • AUDUSD trading at 0.7704
  • EURUSD trading at 1.2017
  • GBPUSD trading at 1.3838
  • USDJPY trading at 107.9400
  • USD Index US Session (ICE Jun) up 0.139 to 91.268

US indexes reversed the previous sessions gains with a late move lower as traders were hit with tax news. A report out spooked investors as who were quick to hit the sell button on the back of a Bloomberg report that the Biden administration would propose to lift the capitals gains tax to near 40% which is nearly double the current rate. The news shows the eagerness of traders to lock in some gains at current lofty levels. Many expected a tax hike was in the pipeline but it seems that they did not expect the big increase so may have sold to beat any potential change to the rate. Funny thing is that the gains are not taxable unless positions are closed so we may see later tonight that the reaction was overdone. The change still needs to get through Congress so many expect that it will fail if Republicans have anything to do with it…there may even be some Democrats that will not want the bill and see their investments take a hit. Bond prices reacted higher with yields falling as the news would take some heat out of inflation if new investments are curbed by the tax increase. The DOW closed down 0.94% while the broader SP500 ended down 0.92% and the Nasdaq closed down 0.94% for the session. In Europe, major Indexes rallied on the back of solid earnings targeting new highs on key indexes. Also helping the bulls cause was news that the ECB left policy unchanged as expected. Prices have now bounced back strong after being recently sold lower Tuesday on new wave of COVID-19 cases. We may see a weak open tonight after Europe missed the US selloff into the close.

The USD Index did not really react to the tax news as price had already edged higher in the European session into recent highs around 91.400. Unemployment claims came out better than expected which stoked the fan for inflation which was later capped by a minor bond rally. The dollar now has tax news for bulls to contend with and an improving economy for bears to contend with so we expect that price will be range bound for now and hold below 91.400. The EURUSD was weighed down by the rally into the USD and also by the ECB statement that was hopeful on the economic recovery but lacking in details about the stimulus removal. This suggests that the ECB still sees the need for support meaning that the economy can not yet stand on its own two feet. Price reacted off highs around 1.2071 and managed to find a bid at 1.2000 to stem the selling. Watching the round number at 1.2000 to see how buyers again react if a retest is on the cards. The GBPUSD was in sell mode from the start of the European session until the US close. Price action has now fallen away from the 1.4000 level back in search of support which we expect to see come in around 1.3810 if price extends down a little further. The AUDUSD was weighed down off the 0.7760 level into support around 0.7702. Price action is now showing a technically bearish pattern that may bring in some sellers for an extension lower. At the least we expect to see a stop hunt of bulls below the 0.7700 level today. The USDJPY saw some dollar weakness and a YEN bid take price back into support around 107.900. Price is extended so we would not be surprised to see a flush of the level before buyers step in to support price.

SPOT GOLD grinded its way lower during Asian and European trade before finding some buyers after a test of the 1777 level held. We expect that sellers are testing the resolve of bulls and are trying to flush some out before another leg higher. If the 1777 level can hold another retest and flush, then expect a squeeze higher. If not then we may see a deeper correction to the 1770 area. Either way, price is still bullish to us and looking to target up to 1810. Crude Oil has repaired some of the damage done by expectations for a hit to demand as Indian covid cases are on the rise. Price held up off the 60.75 area before edging higher into the US close. We expect that if the 61.00 area holds then price will move up through 62.00 to squeeze out some recent sellers. Copper was range bound for the session as buyers managed to fend off selling on the back of the strengthening USD. Price held between support around 4.2550 and resistance around 4.2910 which we expect to see hold today.

Cryptocurrencies were pushed lower and took a hit across the board as the US turned lower in a risk off move. Bitcoin led the charge while Ethereum also turned sharply lower but gave up earlier gains while other pairs also took a hit. The good thing for bulls is that prices are generally testing support so will be closely watched today to see if the levels hold. Bitcoin is currently trading at $52150.9 down 4.80% while Ethereum is at $2447.61 up 3.07% and Ripple is at $1.21218 down 9.10%.

The ASX200 yesterday followed on from where it left off the previous session to rally into the close and push back above the 7000 level. The index closed the day on its highs and ended up 57.9 points to 7055.4 with the Gold, Healthcare and IT sectors leading shares higher. Rising stocks outnumbered declining ones by 710 to 606 and 411 ended unchanged.

The ASX200 is expected to open down 15 points after the SPI200 took a turn lower late in the US session as the DOW dropped on the tax news.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Flash Manufacturing and Services PMI 9am

GBP Retail Sales 4pm

EUR French Flash Services and Manufacturing PMI 5:15pm

EUR German Flash Services and Manufacturing PMI 5:30pm

EUR Flash Services and Manufacturing PMI 6pm

GBP Flash Services and Manufacturing PMI 6:30pm

USD Flash Services and Manufacturing PMI 11:45pm

USD New Home Sales 12am

SPI200 INTRADAY LEVELS TO WATCH