The Morning Jumpstart Macro View

OVERNIGHT MARKET SNAPSHOT FOR THURSDAY 27/05/21 (as at 7:15am AEST)

  • SPI200 (Jun) overnight futures up 3 pts to 7093
  • SP500 up 7.86 pts to 4195.99
  • NASDAQ Composite up 80.83 pts to 13738.00
  • Dow Jones up 10.59 pts to 34323.05
  • FTSE100 down 2.86 pts to 7026.93
  • DAX30 down 14.37 pts to 15450.72
  • GOLD futures US session (June) down $1.20 to $1896.80 an ounce
  • COPPER futures US session (Comex July) up $0.0160 to $4.5225 a pound
  • OIL futures US Session (Nymex July) up $0.14 to $66.21 a barrel
  • CRB Index up 1.00 pts to 203.44
  • AUDUSD trading at 0.7740
  • EURUSD trading at 1.2192
  • GBPUSD trading at 1.4119
  • USDJPY trading at 109.1300
  • USD Index US Session (ICE Jun) up 0.427 to 90.055

US indexes had a tame session to generally hold within the previous sessions range but did manage to end with minor gains. Traders were happy to remain in a holding pattern ahead of inflationary data out tonight where they will be trying to assess the timing of any coming bond buying tapering from the FED. FOMC officials have been hard at it talking up the ‘transitory’ theme recently to try to calm concerns for runaway inflation although the market is not so certain and have lingering doubts that the Fed will not be forced into a corner and have to react sooner rather than later. It seems that the days of ‘buy the dip’ has been moved to the back-burner and traders know that inflation will soon become a talking point within the fed which means interest rate rises down the track. Tech stocks were again the focus of bulls as they provided support to the broader market as US bond price consolidated the previous gains. The bond market will be the key to gauge the outlook for the direction of inflation and therefore the Feds actions. Trading volumes are likely to lessen heading into the Memorial Day long weekend for the US. The DOW closed up 0.03% while the broader SP500 ended up 0.19% and the Nasdaq closed up 0.59% for the session. In Europe, major Indexes also had a benign session with prices drifting lower from the open to end in the red. Banks shares pressured major indexes after central bankers pledged to keep monetary policy loose despite the recent uptick in inflation concerns. The general feel is that stocks may inch higher or hold around current levels until another catalyst presents itself to trigger either a risk on or off move.

The USD Index took a turn higher ahead of inflationary data out later tonight. The move up seemed engineered to squeeze out some recent sellers as they were happy to lock in some gains. The New Zealand dollar rallied after the Reserve bank hinted at higher interest rates which may have spooked some USD bears. We expect that the USD will be capped up around the 90.130 level prior to the data release and any move after will depend on the strength of the number. A clean break up through this level may trigger a bigger short squeeze but also suggests safe haven buying and that inflation is a much bigger problem. The EURUSD gave up recent gains to push back down into the 1.2170 level to hold up just off the zone into the US close. The longer term uptrend remains intact but expect more volatility as buyers patients wears thin. Expecting to see a flush into 1.2170 today but for the level to hold and see some buying support. The GBPUSD remains in the longer term range between 1.4100 and 1.4200 as price hovers around the 4.4100 support level. The weight of the USD rally pushed the Pound into support but we expect that the level will hold today but may be tested on a stop loss hunt below the level. Any further strength into the USD will see a bigger move lower towards the 1.4000 area. The AUDUSD was ramped up early along with the NZDUSD spike but turned lower into the European open to give back all the gains. Buyers managed to provide some support around 0.7733 which may see price edge higher again today. The Aussie remains fixated with the risk on/off sentiment of shares and may remain choppy until the markets get a clearer direction. The USDJPY managed to move higher as the USD gained some traction to rally. Price action may extend on the overnight gains today with a test up to 109.300 before sellers pressure price back lower. For now, price is in no mans land with the bias up in the short term awaiting further direction from the USD. Japan’s economic outlook worsened which weighed on the YEN to help support the pair.

SPOT GOLD drifted lower as recent buyers locked in some gains on the dollar rally. Price remained buoyant as bonds also held recent gains and consolidated highs. Price retested the previous 1890 breakout area during the US session to react higher into the close. We would expect to see the level hold today but may be tested to try and flush more buyers out of the action. Crude Oil generally meandered sideways but not without a flush lower to test bulls. Price remains capped around the 66.50 area but may be building the steam up to spike through to higher levels. The 65.50 level looks to be support in the near term. Copper was a bit like oil…lacked any clear direction and hovered just above the 4.5000 support zone but did hold up well considering the pressure from the dollar rally which is a good sign for bulls. If the level can hold, then expect to see buyers enticed back into the action to trigger a run higher. Of course this will depend on the inflationary data ahead of the US session tonight.

Cryptocurrencies edged their way higher in Asian and European trade but then faded in the US session to be capped by sellers into recent highs. Prices generally look set to range as buyers will need to show more confidence before prices may start the march back into highs. Bitcoin is currently trading at $39971.7 up 1.43% while Ethereum is at $2821.70 up 7.97% and Ripple is at $1.00651 up 6.30%.

The ASX200 started the day on a bullish note yesterday but then faded into the close to give back all the gains plus more. The index ended the day down 22.7 points to 7092.5 with iron ore prices taking a hit and weighed on miners during the Asian session. The Metals and Mining, Resources and Materials sectors weighed the most on the action while the Gold sector was up over 2%. The Nikkei and Hang Seng both rallied after US Fed officials insisted any inflation would be temporary and economic data disappointed sending bond yields lower.

The ASX200 is expected to open up 5/10 points after the SPI200 mirrored the day sessions price action but in reverse with a test of support and then bounce into the US close.

ECONOMIC DATA OUT TODAY (AEDT)

AUD Private Capital Expenditure 11:30am

EUR German Consumer Climate 4pm

GBP MPC Member Vlieghe Climate 9pm

EUR German Buba President Weidmann Speaks 10pm

USD Prelim GDP, Unemployment Claims and Durable Goods Data 10:30pm

USD Pending Home Sales 12am

SPI200 INTRADAY LEVELS TO WATCH