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Asian Open: EUR / JPY explores 3-month lows

Asian futures:

  • Australia’s ASX 200 futures are down -26 points (-0.35%) with the cash market currently trading at 7322.1. opened
  • Japan’s Nikkei 225 futures are down -220 points (-0.79%) with the cash market currently trading at 27,783.08. opened
  • Hong Kong’s Hang Seng futures are down -240 points (-0.86%) with the cash market currently trading at 27,764.68. opened

European Friday closed:

  • The UK FTSE 100 index fell -3.93 points (-0.06%) to close at 7008.09
  • Europe’s Euro STOXX 50 index fell -20.62 points (-0.51%) and closed at 4035.77
  • The German DAX index lost -89.35 points (-0.57%) and closed at 15,540.31
  • France’s CAC 40 index fell -33.28 points (-0.51%) to close at 6460.08

US Friday closed:

  • The Dow Jones fell -299.15 points (-0.86%) to close at 34,687.85
  • The S&P 500 fell -32.87 points (-0.76%) to close at 4,327.16
  • The Nasdaq 100 fell -113,314 points (-0.77%) to close at 14,681.38

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Delta variant weighted on global stocks:

Global stocks traded lower last week as the proliferation of the Delta variant fueled fears of re-lockdowns despite the acceleration in vaccinations. Parts of the USA wore masks again on Friday,

The MSCI All World Index fell -0.62% and emerging markets were also -0.62% lower. In the US, the S&P 500 fell -0.968% on Friday, with 8 of its 11 sectors in the red. Bearish outside weeks formed on Wall Street after three consecutive days of decline closed the week. With the futures markets all pointing down, there is a sense of risk free at the start of the week.

The ASX 200 remains in its 5-week range, although prices have stayed in the top third of the range in the last four sessions. The 20-day eMA provides support as well, but we need to see a convincing break above 7403 before we can assume the trend will continue. Until then, range trading strategies are preferred.

ASX 200 internal market:


ASX 200: 7,348.1 (0.17%) July 17, 2021

  • Consumer discretionary (0.72%) was the strongest sector and Utilities (-0.39%) the weakest
  • 9 out of 11 sectors closed higher
  • 4 out of 11 sectors outperformed the index
  • 110 (55.00%) stocks brought forward, 72 (36.00%) stocks declined
  • 69.5% of the stocks closed above their 200-day average
  • 58% of the stocks closed above their 50-day average
  • 54% of the stocks closed above their 20-day average

Service providers:

  • + 4.35% – Whitehaven Coal Ltd (WHC.AX)
  • + 4.05% – NEXTDC Ltd (NXT.AX)
  • + 3.75% – NRW Holdings AG (NWH.AX)

Underperformer:

  • -5.25% – Evolution Mining Ltd (EVN.AX)
  • -4.03% – Mesoblast Ltd (MSB.AX)
  • -3.32% – Hub24 Ltd (HUB.AX)

Forex: The Japanese yen remains the strongest currency in July

With the generally calm economic calendar, we could get off to a slow start this week, even though nothing of interest is planned for today’s Asian session. BOE’s Jonathan Haskel will speak on “Scars in the UK Economy” at 8:00 p.m. AEST.

The US dollar index (DXY) closed above its 50-week eMA for the first time since May 2020. However, the gap resistance at 92.80 continues to cap gains so it will remain a key area this week.

USD / CAD closed slightly above 1.2600 on strong retail sales, although the bulls are now set to hit the 200-day eMA. We therefore see the potential for a technical correction from current levels but the daily trend remains bullish above 1.2422.

USD / CNY one could watch. While prices fluctuated between 6.4513-0.6500, support was found above the 50-day eMA and a moring star reversal pattern formed on Friday (a 3-day bullish reversal pattern).

NZD / CAD reached the first goal around his 200-day eMA thanks to a hawkish RBNZ meeting last week. While the BOC tapered later that day, the RBNZ appears to be the more restrictive of the two central banks.

GBP / AUD also rebounded from 1.8500 support on Friday, thanks to stronger-than-expected inflation data and restrictive comments from two BOE members.

Risky sentiment kept the Japanese yen firm last week, with several yen pairs finding resistance around the weekly pivot point before moving lower. AUD / JPY retests its 200-day eMA after retreating to pivot last week. A break below 81.30 indicates a continuation of the trend but note support near 90.92. However, EUR / JPY Offer bears a better risk / risk ratio.

The daily chart has been sloping down since the June high, although support was found at the April low and the monthly S1 pivot. This leaves potential for a rebound from current levels, although we will likely need to see stocks rise to confirm risky sentiment for yen pairs. The futures markets are currently saying something different. If prices do manage to jump up, we would look for a lower high to form below 131.00 to eventually break the April low. This would then bring the 200-day eMA and the 129.00 handle for bears into focus as the first target.

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From the weekly COT (Commitment of Traders) report

From Tuesday, July 13th 2021:

  • Traders reduced their net short exposure to USD 4.2 billion for the fifth straight week, but are net long against emerging markets by USD 600 million.
  • The net long exposure to the US Dollar Index Futures contract rose to a 14 month high as short bets were placed.
  • Big speculators switched to net long exposure to 10-year US Treasuries.
  • Net long gold futures exposure increased for the second straight week.

Raw materials:

WTI printed its first bearish fourth week as delta worries and expectations of rising oil supplies took the wind out of bullish sails. However, Friday printed a small bullish doji on its 50-day eMA, showing the potential for support at around $ 70.0.

gold finally broke above the 1818 resistance on Wednesday, but a subsequent minor doji and bearish engulfing candle brought prices back below breakout levels to create an Evening Star Reversal formation. The decline stopped at trend support projected from the low, which is a key area to focus on at the start of the week.

silver fell for a second week and just above the June low. Given the volatility of Friday’s bearish candle below the 50-day eMA, we suspect that momentum has now adjusted to the downward move in early June and that the 200-day eMA support level may now be breached. Hence, we see a break below 25.40 as a bearish trend continuation signal and focus on the lows around 24.00 for bears.

Next (times in AEST)

You can view all of the events planned for today in our economic calendar and keep up to date with the latest market news and analysis here.

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