Asian Open: USD lower post FOMC minutes, bearish triangle on EUR/AUD

Wednesday US cash market close:

• The Dow Jones Industrial fell -54.57 points (-0.16%) to close at 34,934.27
• The S&P 500 index rose 3.94 points (0.09%) to close at 4,475.01
• The Nasdaq 100 index fell -17.18 points (-0.12%) to close at 14,603.64

Asian futures:

• Australia's ASX 200 futures are up 3 points (0.04%), the cash market is currently estimated to open at 7,287.90
• Japan's Nikkei 225 futures are up 30 points (0.11%), the cash market is currently estimated to open at 27,490.40
• Hong Kong's Hang Seng futures are down -3 points (-0.01%), the cash market is currently estimated to open at 24,715.90
• China's A50 Index futures are down 0 points (0%), the cash market is currently estimated to open at 15,079.73

US indices recouped earlier losses and effectively closed flat whilst volatility was below its average true range. It seems a fresh catalyst is required and, whilst tensions remain with Russian and Ukraine, they have neither escalated or abated much which has removed a directional element to sentiment. Future markets point to a non-eventful open, although the ASX 200 appears set to challenge 7300.

ASX 200 appear set to challenge 7300

You know it’s a good day when over 80% of the ASX 200 stocks rallied. And it could have notched up more than the 1% it did, were it not for the Materials and Energy sectors posting losses on the day. Healthcare stocks rose form the dead with the sector posting a 6.2% rally, during its most bullish session since March 2020. Strong half-year earnings from CSL bolstered the sector.

9 of the 11 ASX 200’s sectors posted gains, and the index closed at the high of the day. 7300 and 7340.40 remain key levels for bulls to conquer over the near-term, and we’d like to see any breakout accompanied with above-average volume to attain conviction.

ASX 200: Market internals

ASX 200: 7284.9 (1.08%), 15 February 2022

• Healthcare (6.22%) was the strongest sector and Energy (-0.74%) was the weakest
• 9 out of the 11 sectors closed higher
• 2 out of the 11 sectors closed lower
• 7 out of the 11 sectors outperformed the index
• 165 (82.50%) stocks advanced, 28 (14.00%) stocks declined

Outperformers:

• +17.99% - Liontown Resources Ltd (LTR.AX)
• +12.73% - Imugene Ltd (IMU.AX)
• +11.67% - Treasury Wine Estates Ltd (TWE.AX)

Underperformers:

• -9.76% - Netwealth Group Ltd (NWL.AX)
• -3.35% - Infratil Ltd (IFT.AX)
• -2.84% - Santos Ltd (STO.AX)

Dollar weaker following FOMC minutes

There’s been a lot of fanfare about a potential 50 bps Fed-hike in March and up to seven hikes this year in total. Yet the minutes of their January meeting lacked such conviction, although to be fair the meeting was held before an eyewatering 7.5% inflation print. The minutes revealed that any tightening would be on a meeting-by-meeting basis, which took some fun out of some hawkish punch bowls and sent the US dollar broadly lower.

EUR/AUD breaks out of descending triangle

NZD and AUD were top performers, AUD/JPY reached our initial 83.0 target and is set to close above this handle. Momentum continues to point the wrong way (up) on NZD/CAD so we’re scrapping our bearish bias for now, even though the 0.8514 high has not been breached.

Another cross which has caught our eye is EUR/AUD as it has broken down from a descending triangle. The pattern projects a target just above the monthly S1 pivot at 1.5650. Interim support resides around 1.5700 and the 1.5750/72 zone which make them viable targets along the way. Although prices are meandering around the monthly pivot point and show the potential for mean reversion, so it may be prudent to see if 1.5834 holds as resistance before committing to the short side.

Volatility on oil remains elevated

Yet it’s seemingly not yet ready to give up earlier gains just yet. Traders seem correct in taking Russia’s ‘troop withdrawal’ claim with a pinch of smelling-salts. And with demand remaining high alongside calls for $100 oil, it will likely take more than a mere mention of troop withdrawal to topple black gold just yet. WTI held above 91.77, a long-term support level overnight, and it is likely to remain a pivotal level today.

Gold hints at breakout

Gold reclaimed its safe-haven status after Tuesday’s volatile wobble and reclaimed most of the prior day’s losses, using 1850 as a springboard in the process. A daily close above 1880 would be constructive for the bull case, as it clears the November high and takes the yellow metal to its most bullish level since June 2021 – likely on geopolitical tensions.

Up Next (Times in AEDT)

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