The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR WEDNESDAY 20/05/21 (as at 7:15am AEST)

  • SPI200 (Jun) overnight futures up 4 pts to 6932
  • SP500 down 12.15 pts to 4115.68
  • NASDAQ Composite down 3.90 pts to 13299.74
  • Dow Jones down 164.62 pts to 33896.04
  • FTSE100 down 84.04 pts to 6950.20
  • DAX30 down 273.02 pts to 15113.56
  • GOLD futures US session (June) up $2.10 to $1870.10 an ounce
  • COPPER futures US session (Comex July) down $0.1568 to $4.5687 a pound
  • OIL futures US Session (Nymex Jun) down $2.13 to $63.36 a barrel
  • CRB Index down 3.92 pts to 201.86
  • AUDUSD trading at 0.7727
  • EURUSD trading at 1.2174
  • GBPUSD trading at 1.4115
  • USDJPY trading at 109.2100
  • USD Index US Session (ICE Jun) up 0.438 to 90.172

US indexes opened weaker but then spent all session rallying intraday with the Nasdaq ending relatively flat into the close. The three major Indexes price action may be confirming short term double bottoms which may drag in more buyers in coming sessions. Tech stocks were supported by the Fed minutes that said they are far from their goals even with the current inflation concerns. Many officials said that it will become appropriate in coming meetings to discuss tapering bond buying but for now all remains the same but data since – jobs numbers and employment – may have already changed their tune. The Fed continues to view inflationary pressure, that is becoming more evident in the economy, as transitory and they are still too far from their employment targets to ease yet. The wording is what will spook the market as there is more talk of easing, although it is expected to be into 2022 before action is taken. Bond prices did move lower but the move was prior to the Fed release which then provided support to prices. Many are anticipating a selloff which is bringing in volatility but general trends remain in tact and the bigger picture has not changed. The DOW closed down 0.48% while the broader SP500 ended down 0.29% and the Nasdaq closed down 0.03% for the session. In Europe, major Indexes took a hit to follow on from the previous US sessions weakness but we do expect them to bounce back today after the US rallied from the open. Traders were increasing bets that the US will raise rates earlier than expected but the Fed minutes well after the European close, may have eased that concern to some extent.

The USD Index rallied after the minutes release but we see that as more of short squeeze than any repositioning long into the dollar. Sellers were a little on edge into the release but the longer term trend is down and we would expect that longs off the 90.000 area will again be disappointed. At this stage, nothing has changed and the Fed minutes were prior to the April payrolls which were a lot weaker than expected. The EURUSD eased its way off the 1.2220 level as the USD rallied, to find some buyers at the 1.2180 zone. The action may see a further extension to the downside today to squeeze out more buyers but the longer term trend up remains in tact. If price presses down to the 1.2130 area, we expect to see some buying interest for support. The GBPUSD continued the move lower off the 1.4200 area as the dollar rallied. At this stage the short term trend is down and we expect that buyers will be looking for an area to provide support, potentially around 1.4080. Price is extended and we do expect that the USD will be capped as more traders re-assess the FOMC minutes. The AUDUSD took at hit with the risk off sentiment into shares and also from the weight of the USD rally. Price may again find some buyers into the 0.7700 area as price is currently extended. We will have to wait and see the reaction today into shares to see if there is any follow through negativity that will pressure the Aussie. The USDJPY had a strange session as the pair rallied early, then spiked lower potentially on the back of the crypto selloff, then spiked straight back up into the Fed Minutes release….all in all washing out both sides of the market. We expect that the action may need to settle before re-astablish a direction but do expect to see some USD pressure back into price.

SPOT GOLD flushed both sides of the market, below 1860 and then back up through 1880, before settling back where it started. We expect that gold will see further chop in coming sessions but generally hold and consolidate around the highs to find further support before a rally higher. Bulls will find some solice in the rejection of lows and then rally which may be the market showing its hand…we will see. Crude Oil took a hit on the unwinding of risk into share markets even after inventory data showed a smaller-than-expected build in weekly stockpiles. Price flushed through support at 63.00 and then 62.30 before rallying to end back above 63.00. We will be watching this level closely as the spike lower looks over done and buyers may be happy to defend the 63.00 zone. Copper also took another hit as share markets got jittery. It would be expected that there will be some concern around highs after such a bit run up and any selling pressure to be exacerbated with the amount of bulls locking in gains. The move still looks corrective off major highs and does have the potential to unwind a lot further if buyers can not make a stand. The macro picture remains the same so we do expect a pickup in volatility in coming sessions as bulls and bears fight it out after the highs have been confirmed.

Cryptocurrencies were hit hard again with Bitcoin spiking $10k lower in the European session before bouncing back. The move was triggered by a regulatory crackdown on Bitcoin in China and it seems that there were a few margin positions getting dumped as the selling caught many off guard. Prices did bounce back after Elon Musk and Ark Invest’s chief executive officer Cathie Wood reiterated support….but they probably just have bigger positions to exit so do not want things to get out of hand (said with a hint of sarcasm). Major cryptos are down around 25% across the board so there is a big unwinding at play. Bitcoin is currently trading at $38440.4 down 11.10% while Ethereum is at $2542.80 down 25.20% and Ripple is at $1.13140 down 28.28%.

The ASX200 was hit hard yesterday as Aussie traders seemed less happy with US inflation than the US are. The index was hit on the open and price continued to be pressured all day as bulls cut risk and headed for the hills as the index ended the session down 134.3 points to 6931.7. It was a sea of red across the sectors with Metals and Mining, Resources and Materials leading the charge lower on expectations that commodities have peaked…even as the USD heads lower.

The ASX200 is expected to open up 5/10 points after the SPI200 spiked lower in European trade only to bounce right back as the US rallied from the open.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Employment Change and Unemployment Rate 11:30am

NZD Budget Release 12pm

EUR German PPI 4pm

EUR Current Account 6pm

EUR ECB President Lagarde Speaks 10pm

USD Unemployment Claims and Philly Fed Manufacturing Index 10:30pm

CAD BOC Gov Macklem Speaks 1am

SPI200 INTRADAY LEVELS TO WATCH