Asian Open The Prospect of US Iran Nuclear Deal weighs on Oil Prices

Asian Futures:

• Australia's ASX 200 futures are down -79 points (-1.12%), the cash market is currently estimated to open at 6,987.00
• Japan's Nikkei 225 futures are down -370 points (-1.3%), the cash market is currently estimated to open at 28,036.84
• Hong Kong's Hang Seng futures are down -36 points (-0.13%), the cash market is currently estimated to open at 28,557.81

UK and Europe:

• UK's FTSE 100 index rose 1.39 points (0.02%) to close at 7,034.24
• Europe's  Euro STOXX 50  index fell -1.5 points (-0.04%) to close at 4,005.34
• Germany's DAX  index fell -10.04 points (-0.07%) to close at 15,386.58
• France's CAC 40 index fell -13.68 points (-0.22%) to close at 6,353.67

Tuesday US Close:

• The Dow Jones Industrial fell -267.13 points (-0.78%) to close at 34,060.66
• The S&P 500 index fell -35.46 points (-0.86%) to close at 4,127.83
• The Nasdaq 100 index fell -95.23 points (-0.72%) to close at 13,217.68

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Commodities: ‘Major’ announcement weighs on oil prices

The reports are yet to be confirmed, but a Persian BBC news channel claim that a ‘major’ announcement between US and Iran ay be announced today, presumably surrounding the revival of the 2015 nuclear deal. Still, the report cited a Russian Ambassador as its source, so oil prices could rebound sharply should the report turn out to be a dud.

The threat of increased support sent WTI futures -1.2% lower and form a bearish outside candle on the daily chart. Brent futures initially fell -2.9% before revering its way to a -0.7% down day below $70 resistance.

As suspected, gold tested but respected 1875 resistance. Profit taking / retracement is a possibility from current levels, so we’d look for support to build around 1844-1850 ahead of its breakout (assuming the break higher does not occur first). The trend remains bullish above 1808.

Silver threw a curve ball to the bull-camp by printing a bearish pinbar back beneath the breakout level of 28.32. A corrective phase now appears more likely. You can view our gold and silver analysis in yesterday’s video.

Indices lower for a second day:

Wall Street was lower for a second consecutive session with equities selling off at a faster pace in the final 20 minutes of trade. The S&P 500 (-0.85%) led the large caps lower with nine out of the eleven sectors closing lower (with energy stocks taking the biggest hit). Closing beneath the 10 and 20-day eMA, a three-day bearish reversal candle has formed (Evening Star Reversal) which is confirmed with a break beneath yesterday’s low. Similar patterns emerged on the Dow Jones (-0.78%) and Nasdaq 100 (-0.72%).  The Russell 2000 fell -1.26% although the Russell 200 growth index was down just -0.12%.

The ASX 200 continues to retrace against last week’s three-day decline, but not at a rate which concerns the potential for another leg lower. A potential rising / bearish wedge is forming on the hourly chart, so should momentum shift lower the initial target is the 6966 low, a break of which brings the 6900/05 low into focus.

ASX 200 Market Internals:

ASX 200: 7066 (0.60%), 18 May 2021

• Energy (1.63%) was the strongest sector and Real Estate (-0.58%) was the weakest
• 4 out of the 11 sectors outperformed the index
• 4 out of the 11 sectors closed lower
• 8 out of the 11 sectors closed higher
• 93 (77.50%) stocks advanced, 95 (79.17%) stocks declined
• 5 hit a new 52-week high, 4 hit a new 52-week low
• 133.33% of stocks closed above their 200-day average
• 84.17% of stocks closed above their 50-day average
• 101.67% of stocks closed above their 20-day average

Outperformers:

• + 11.46%   -  0  (NXL.AX) 
• + 7.91%   -  0  (PLS.AX) 
• + 6.41%   -  0  (OZL.AX) 

Underperformers:

• -9.02%   -  St Barbara Ltd  (SBM.AX) 
• -6.38%   -  Monadelphous Group Ltd  (MND.AX) 
• -4.51%   -  James Hardie Industries PLC  (JHX.AX) 

Forex: USD approaches YTD low

The euro and Swiss franc were the strongest majors overnight, whilst the Canadian (thanks to lower oil prices) and US dollar (thanks to dovish Fed) were the weakest. EUR/USD was the strongest pair, closing above 1.2200 for the first time since January and USD/CHF traded beyond our initial bearish target of the 0.8982 – 0.9000 zone.

The US dollar index (DXY) closed beneath 90.0 for the first time since January 5^th and just above the February low of 89.38. A break beneath here brings the YTD low of 89.20 into focus, but it should be noted that the 88-89 zone has been hard for prices to break beneath since breaking above them in 2014. So we could be approaching an inflection points over the coming week/s.

BOE (Bank of England) Governor Andrew Bailey said he does not see strong evidence that input price pressures are making their way over to consumer prices. The GBP/USD is now the strongest major month to date, currently up 2.7% and rose to its highest level since February’s YTD high.

It was mixed for AUD overnight and the currency remains in volatile holding patterns across a few pairs. AUD/NZD is chopping around between 1.0714 and 1.0800 after breaking its bullish trendline, yet a break beneath 1.0714 suggest its next leg lower has begun. AUD/CHF is considering a break below 0.6981 support. AUD/CAD remains beneath the 0.94317 high so the bias remains for a run towards the 0.9300/25 support zone.

EUR/AUD setting up for a breakout?

A series of higher lows has formed leading into 1.5690 resistance and, more recently, bullish momentum has increased into a higher level of support at 1.5594. With demand rising alongside prices, we are now on the lookout for a break above 1.5690 which should bring the 1.5800/1.5900 handles and 1.5947 high into focus for bulls. Conversely, should prices print another reversal candle around resistance then break beneath 1.5594, it suggests bears have regained control and momentum could take prices back into range.

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