The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR WEDNESDAY 19/05/21 (as at 7:15am AEST)

  • SPI200 (Jun) overnight futures down 79 pts to 6982
  • SP500 down 35.46 pts to 4127.83
  • NASDAQ Composite down 75.41 pts to 13303.64
  • Dow Jones down 267.13 pts to 34060.66
  • FTSE100 up 1.39 pts to 7034.24
  • DAX30 down 10.04 pts to 15386.58
  • GOLD futures US session (June) up $2.20 to $1869.80 an ounce
  • COPPER futures US session (Comex July) down $0.0045 to $4.7070 a pound
  • OIL futures US Session (Nymex Jun) down $0.78 to $65.49 a barrel
  • CRB Index down 0.17 pts to 205.78
  • AUDUSD trading at 0.7799
  • EURUSD trading at 1.2223
  • GBPUSD trading at 1.4187
  • USDJPY trading at 108.8800
  • USD Index US Session (ICE Jun) down 0.362 to 89.780

US indexes were doing okay until the last hour when a bout of selling hit the market to pressure prices lower into the close. The DOW dropped 200 points and the SP500 was hit down 17 points as Nasdaq turned negative. Inflation was again the main focus as traders are seeming less and less convinced that it will be transitory and are starting to question the Fed Reserve. Housing starts dropped more than expected as the surging lumber prices weigh on US home building adding a lot to the underlying costs of new homes. Some people are happy to soak up the higher prices while others are holding off hoping for some respite. With retailers, supply bottlenecks are the issue and that will only add to price pressures until the bottlenecks ease…which the fed will argue is transitory. US Bond markets did not show the same negativity as the Indexes as price held a minor higher low and rallied into the US close. If they were to be again concerned for inflation, we would have expected yields to rally and bonds to fall. If there was a safe haven bid into bonds, then the USD would have found a bid also which it did not. So we expect that the late selling was traders taking some risk off the table into the FOMC minutes tonight. The DOW closed down 0.78% while the broader SP500 ended down 0.85% and the Nasdaq closed down 0.56% for the session. In Europe, major Indexes opened the session stronger but then it was all one way action lower as gains were given back into the close. Prices were strong on the open thanks to optimism around several countries easing economic restrictions, falling unemployment rate in the UK and some strong earnings reports. Prices were later pressured by inflation concerns and expectations that Fed Reserves may be forced to dial back support.

Seems that fund managers have trimmed their overweight positions on technology stocks to a three-year low and turned to the UK to go overweight for the first time in years according to a survey from Bank of America.

The USD Index took a hit and was pushed down through the 90.00 level which is a concern for bulls. Price did react off the 89.670 level which we will be watching to see if it can drag in more buyers or whether price extends down to 89.200. Either way sellers are in control and the dollar continues to be pressured lower with all eyes on the FOMC minutes tonight. The EURUSD was all one way action higher as the USD broke below the 90 area. Bulls have now extended the price into previous highs and potential resistance around 1.2222 although the longer term uptrending channel is still in play so we are watching for a reaction lower followed by some consolidation before buyers step back into to resume the move higher. Again this will depend on the USD and the reaction to the Fed minutes. The GBPUSD ramped up through the Asian session and into the start of the European session before finding some sellers into previous major highs. Sellers managed to cap buyer enthusiasm around 1.4220 as price held a minor lower high. The action is not negative but more corrective off highs so we do expect some more heat will come out of the rally before bulls are happy to step back in to support price. The minor anchor to the recent up trend is still holding at 4.4164 which may be tested today. The AUDUSD did rally early and is on the move higher but lacked the bullish pressure as with the Euro due to the weakness into major US indexes. Price does suggest that buyers may hold the 0.7780 area and look to add to the rally which would suggest that there will be further support into share markets on the tried and true ‘buy the dip’ mentality…we will see. The USDJPY did finally break down below the 109.000 area early in Asian trade before buyers were able to soak up selling pressure below the zone. The dollar weakness capped the action and sellers were able to hold minor lower highs so we are watching for a flush of 108.840 to trigger stops and trap some sellers as price may look to hold the rising support around 108.800.

SPOT GOLD managed to consolidate the previous sessions gains up around the 1870 area which is a good sign for bulls looking to higher levels. We do expect that sellers will try to squeeze out bulls on a pullback but with bond prices looking to rally, support from buyers may trigger a move up and through 1873. Crude Oil spiked lower on concerns for a wave of Iranian oil supply after reports that a nuclear deal may be sealed later today. The move was reactive and has flushed out a lot of bulls ahead of Oil Inventories later tonight. For now, the move confirms that price is happy to hold in a very broad channel between 63 and 66.70. Copper also took a hit as share markets came under pressure and had traders assessing whether price has over extended with regards to expected demand. We see the action lower as corrective and expect that buyers will be looking to support price for another push higher but the 4.6435 level will need to hold potentially supporting a higher low around 4.6920.

Cryptocurrencies remained under pressure although many cryptos are showing signs of finding support. Bitcoin is currently on lows and seems the biggest issue for bulls as price is trading at $42978.9 down 1.31% while Ethereum is at $3397.27 up 3.93% and Ripple is at $1.59039 up 6.52%.

The ASX200 managed to hold on to the opening gains yesterday as buyers traded with more confidence and lifted the index up 42.4 points into the close….which may not be the case today. In the end the ASX ended at 7066 with the heavy lifting done in the Metals and Mining, Gold and Resources sectors while Energy also gets an honourable mention. Covid concern continues to be an issue with traders, as they closely monitor the state of play in Taiwan and Singapore.

The ASX200 is expected to open down 80 points after the SPI200 was hit hard back down to support in a negative overnight session. We expect that the weakness on the open will drag in some bargain hunters into the ASX.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Westpac Consumer Sentiment 10:30am

AUD Wage Price Index 11:30am

GBP CPI and PPI Data 4pm

EUR ECB Financial Stability Review Tentative

EUR Final CPI 7pm

CAD CPI Data 10:30pm

USD Crude Oil Inventories 12:30am

USD FOMC Meeting Minutes 4am

SPI200 INTRADAY LEVELS TO WATCH