Asian Open Industrial Metals and Commodity FX Rally on Stimulus Talks

Asian Futures:

• Australia's ASX 200 futures are up 58 points (0.82%), the cash market is currently estimated to open at 7,152.90
• Japan's Nikkei 225 futures are up 350 points (1.23%), the cash market is currently estimated to open at 28,899.01
• Hong Kong's Hang Seng futures are up 13 points (0.04%), the cash market is currently estimated to open at 29,126.20

UK and Europe:

• UK's FTSE 100 index fell -7.26 points (-0.1%) to close at 7,019.67
• Europe's  Euro STOXX 50  index rose 7.54 points (0.19%) to close at 4,039.21
• Germany's DAX  index fell -43.99 points (-0.28%) to close at 15,406.73
• France's CAC 40 index rose 44.11 points (0.69%) to close at 6,435.71

Thursday US Close:

• The Dow Jones Industrial fell 141.59 points (-0.41%) to close at 34,464.64
• The S&P 500 index rose 4.89 points (0.12%) to close at 4,200.88
• The Nasdaq 100 index fell -44.895 points (-0.33%) to close at 13,657.85

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Wall Street mixed despite stronger economic data

Unemployment claims continued to fall and Q1 GDP was confirmed at 6.4% (second fastest growth since 2003) to show the economic rebound was maintaining momentum. Furthermore, US Republicans gave the US infrastructure bill a new lifeline overnight by unveiling a $928 billion package to rejuvenate roads, bridges and broadband systems. Whilst this still falls far short of the White Houses’ $2.25 trillion package, it’s still enough to keep talks ongoing.

The Russell 2000 gained a further 0.7% following Wednesday’s 2% rebound, with value stocks outperforming growth. The S&P 500 closed 0.12% higher, led by the financials and materials sectors, although tech stocks fell with the Nasdaq 100 closing -0.3% lower.

The Euro STOXX 600 again failed to hold onto gains after printing a record high, closing just beneath the prior high at 446.44 yet up 0.3% from the prior close.

Futures markets are pointing to a stronger open in Asia, with the ASX 200 currently pencilled to open around 7152. This places the February high of 7172.80 and record high of 7197 into focus. Given the OBV (on balance volume) indicator is pushing higher ahead of prices, it suggest demand is building and bulls may well have a crack at these milestone levels over the coming session/s. A break beneath 7082 signals the potential for a correction.

ASX 200 Market Internals:

ASX 200: 7094.9 (0.03%), 27 May 2021

• Information Technology (1.92%) was the strongest sector and Utilities (-1.18%) was the weakest
• 4 out of the 11 sectors outperformed the index
• 5 out of the 11 sectors closed higher
• 102 (51.00%) stocks advanced, 87 (43.50%) stocks declined
• 12 hit a new 52-week high, 0 hit a new 52-week low
• 64% of stocks closed above their 200-day average
• 54.5% of stocks closed above their 50-day average
• 54% of stocks closed above their 20-day average

Outperformers:

• + 8.45%   -  AMP Ltd  (AMP.AX) 
• + 8.05%   -  TPG Telecom Ltd  (TPG.AX) 
• + 6.17%   -  Pilbara Minerals Ltd  (PLS.AX) 

Underperformers:

• -24.1%   -  Costa Group Holdings Ltd  (CGC.AX) 
• -5.99%   -  Fisher & Paykel Healthcare Corporation Ltd  (FPH.AX) 
• -4.90%   -  Domino's Pizza Enterprises Ltd  (DMP.AX) 

Forex: CAD propelled by oil prices

GBP and CAD were the strongest majors, whilst JPY was the weakest amid a risk-on (commodity fuelled) session. GBP/JPY rose 1.3% to its highest level since February 2018 and a break above here take it to a post-Brexit it high. NZD/JPY broke above 80.0 and USD/JPY rallied to a six week high and stopped just shy of our original 110.0 target.  

Rising oil prices helped the Canadian dollar finish the session in second place, seeing the Loonie rise 1.2% against the Japanese yen, 0.5% against the US and Australian dollar and 0.4% against the Swiss franc. CAD/JPY enjoyed its most bullish session in three months and closed at its highest level since January 2018.

CAD/CHF spiked its way to a five-day high. Whilst this goes against our bearish bias outlined in yesterday’s Asian open report, prices remain beneath the 0.7466 invalidation point (and the idea was generated from a weekly chart so extra breathing room is required) so all is not lost. A break beneath yesterday’s lows assumes bears have regained control.

The US dollar index (DXY) gave back earlier gains to close lower by a mere -0.08% after finding resistance at a trendline projected from the March high. The Chinese Yuan continued to appreciate as Beijing tries to fend off rising commodity prices, sending USD/CNH to its lowest level since May 2018.

EUR/CAD prints 3-bar bearish reversal in line with trend

EUR/CAD looks set to break lower. It remains in a strong downtrend in the daily chart although prices have been in a counter-trend phase through most of May. Yet two ‘selling tail’ have failed to break above the 38.2% Fibonacci ratio and yesterday’s large bearish candle completed a three-day bearish reversal pattern called an Evening Star Reversal. We are now waiting if prices can break trend support so momentum can realign with its bearish trend.

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Commodities: Oil and Industrial metals rally

Stronger employment data in the US saw WTI rise just over 1% to a seven-day high. Closing at 66.88 it sits just off the May high and just $1.09 from the year-to-date high set in March. Brent rose 0.4% and settled at 69.45.

Copper prices came back to life and rallied over 3% during its most bullish session in three weeks. Stronger economic data from the US and china alongside threats of strikes from Chilean copper miners were the perfect storm for bulls to snap up the orange metal with confidence, reaffirming our suspicions that the corrective low was set 4.44 following Monday’s small bullish hammer.

Silver rose 0.62% and held above 27.5 support and prices remain within its bullish channel, so a break above 27.90 today would be constructive for the bull case. Gold prices found support around 1890 although closed effectively flat for the session at 1895.

Up Next (Times in AEST)

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