Asian Open Nasdaq takes one for Wall Street USD and yields rise

Asian Futures:

• Australia's ASX 200 futures are up 48 points (0.71%), the cash market is currently estimated to open at 6,787.60
• Australia's ASX 200 futures are up 60 points (0.21%), the cash market is currently estimated to open at 28,803.25
• Australia's ASX 200 futures are up 194 points (0.68%), the cash market is currently estimated to open at 28,734.83

UK and Europe:

• The UK's FTSE 100 futures are up 75 points (1.13%)
• Euro STOXX 50 futures are up 85 points (2.32%)
• Germany's DAX futures are up 440 points (3.16%)

Monday US Close:

• The Dow Jones Industrial rose 306.14 points (0.97%) to close at 31,802.44
• The S&P 500 index fell -20.59 points (-0.54%) to close at 3,821.35
• The Nasdaq 100 index fell -369.431 points (-2.92%) to close at 12,299.08

Indices: Nasdaq at the mercy of bears

The Technology sector took one for Wall Street overnight, falling over 2% in the face of rising yields. 74 stocks within the Nasdaq 100 declined, 28 advanced and none were left flat by the close. Weakness in the technology sector remains a biproduct of stronger yields, following the passage of the $1.9 trillion COVID-19 fiscal stimulus package by the US Senate.

Whilst the S&P 500 and Russell 2000 weren’t as hard hit they did leave small bearish hammers on the daily charts which closed beneath their 10 and 20-day eMAs. Meanwhile the DAX closed ot a record high and CAC closed at its highest level since February 2020.

GameStop (GME) shares rallied a further 53% on Monday (following a 35% gain last week) to lift the SPDR retail ETF (XRT) up 5.7%. GameStop is the ETF’s biggest holding.

Forex: Dollar bulls squeeze dollar bears

The US dollar was the strongest currency overnight and made headway against majors and exotics. The Turkish lira (USD/TRY) gained 2.9% and moved to a 3-month high, the South African rand (USD/ZAR) rose over 1% and sits at an 8-week high. The Mexican peso (USD/MXN) extended its lead earlier on to an 18-week high but retraced later in the session and now trades 0.6% higher.

USD/CNH has risen to a 3-month high, in line with our bullish bias outlined in yesterday’s Asian open report. The bias remains bullish above yesterday’s low and initial target is the 6.6100 – 6.6277 resistance zone.

The European dollar came under pressure as Germany’s industrial output declined by -2.5% in January, completely missing expectations of a +0.2% rise. EUR/USD printed fresh lows and broke beneath the 1.1900 barrier. Whilst the trend continues to point lower traders should take note of potential support at the 200-day eMA around 1.1830. View Joe Perry’s currency pair of the week on EUR/USD.

The British pound was firmer against the euro, yen, New Zealand dollar and Australian dollar. Bank of England’s Governor Andrew Bailey spoke last night and warned that more evidence than usual could be required to tell whether incoming inflation will be persistent or temporary. Although, like markets are clearly pricing in, he expects inflation to arrive over the near-term regardless of how ‘sticky’ it becomes at higher levels.

EUR/GBP made a clean break beneath 0.8596 support and fell to an 8-day low. Given the established bearish trend on the daily chart and likelihood of a ‘weak low’ at 0.8537, we fancy its odds of a break of this support level.  

AUD and NZD remained sensitive to USD strength with both AUD/USD and NZD/USD turning lower to face Friday’s lows. AUD/USD has twice failed to break bac above 0.7700 resistance over the past two sessions and a break beneath 0.7624 (Friday’s low) brings the 100-day eMA and swing low around 0.7560 into focus for bears. NZD/USD has found resistance at its 50-day eMA and the 0.7200 handle, and a break beneath 0.7096 will take it to its lowest point this year.

AUD/NZD: Battle of the weaklings

With both AUD and NZD under pressure of the USD, it is not the usual divergent theme we’d prefer to look for. Yet as AUD/NZD has provided some great swing trading opportunities over recent months we are now keeping a close eye on the Antipodean cross for its next potential inflection point.

On the daily chart we can see that a series of bearish hammers and pinbars has formed over the past week. And this is a feature which stands out on the January and February highs. Moreover, each swing high has been lower than the last to show plenty of support around 1.0795.

• A break below 1.0716 suggests the swing high has been confirmed and brings the 1.0640 low into focus for bears.
• A daily close above the 61.8% (or the hammer highs) invalidates the bearish bias.
• A weak close beneath support is also les desirable for a breakout approach. Ideally, we want to see large bearish bars like the previous swing high breakouts.

Commodities: Gold folds under dollar pressure

We thought 1700 may hold a little longer than it did. Bears retained full control over gold prices overnight and drove the slightly-less precious metal down to 1680 with a bearish outside candle. Given such a firm close below key resistance, and no sign of a bottom forming on price action, further downside appears to be the path of least resistance and a likely bias for intraday bears.

Silver found a little stability above $25 although a ‘selling tail’ (high wick) found resistance below the 10-day eMA. This begs the question, will silver now follow gold lower?

WTI and Brent fell nearly -2% from their highs overnight. With WTI closing back below key support levels between 65.65 and 66.60 (January 2020 high and April 2019 high) then it could signal the beginning of a correction, however minor it turns out to be.

Up Next (Times in AEDT)

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.

• At 09:00 AEDT RBA Governor Dr Philip Lowe is scheduled to speak at the Australian Financial Review business summit.
• Japan’s GDP figures are the revised (final reads) so we do not expect any major market reactions to them, barring a significant revision from prior.