Asian Open: Strongest week in two months for the ASX 200

Closing the week just shy of 7,000, momentum appears favourable for the ASX 200 to re-test its pre-pandemic high.

Australia

Asian Indices:

  • Australia's ASX 200 closed at a 13-month high of 6,995.20
  • Japan's Nikkei 225 index has risen by 120.79 points (0.41%) and currently trades at 29,829.77
  • Hong Kong's Hang Seng index has fallen by -309.27 points (-1.07%) and currently trades at 28,698.80

Europe:

  • Euro STOXX 50 futures are currently up 12 points (0.31%), the cash market is currently estimated to open at 3,990.84
  • Germany's DAX futures are currently up 61 points (0.4%), the cash market is currently estimated to open at 15,295.16

Friday US Close:

  • The Dow Jones Industrial rose 297 points (0.89%) to close at 33,800.60
  • The S&P 500 index rose 31.63 points (0.78%) to close at 4,128.80
  • The Nasdaq 100 index rose 86.55 points (0.63%) to close at 13,845.06

Strong close for European and US indices:

It was a strong close for the Australian share market, which settled just shy of 7,000 at a 13-month high. Similar to US indices, technology stocks were the leaders of the pack and, given the strength of momentum leading into this resistance level, the bias remains for a move towards 7,100. Still, a small hanging man candle formed on Friday following five consecutive days of gains, so perhaps a period of consolidation is due. The bias remains bullish above the original breakout level of 6,938.

The S&P 500 and Dow Jones finished the week in style by closing at their record high, the Nasdaq printed a bullish engulfing candle on Friday and closed just beneath its February all-time high. Small stocks are missing action with the Russell 2000 closing lower but holding above its 20-week eMA.


ASX 200: Market Internals


ASX 200 at the close: 6995.2 (-0.05%), 08 April 2021

  • Information Technology (0.72%) was the strongest sector and Consumer Staples (-1.1%) was the weakest
  • 6 out of the 11 sectors outperformed the index
  • 100 (50.00%) stocks advanced and 81 (40.50%) declined
  • 5 hit a new 52-week high
  • 75.5% of stocks closed above their 200-day average
  • 81.5% of stocks closed above their 20-day average

Outperformers

+ 6.14%   -  Silver Lake Resources Ltd  (SLR.AX) 

+ 5.96%   -  Westgold Resources Ltd  (WGX.AX) 

+ 5.89%   -  Kogan.com Ltd  (KGN.AX) 

Underperformers:

-3.23%   -  Lynas Rare Earths Ltd  (LYC.AX) 

-3.17%   -  Metcash Ltd  (MTS.AX) 

-3.07%   -  A2 Milk Company Ltd  (A2M.AX) 


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Forex: Has the dollar topped?

It’s certainly something to consider, with the US dollar index (DXY) falling to a two-week low after finding resistance at its 50-week eMA. Falling -0.91% it was its worst week this year and now sits at a two-week low.

The dollar’s decline has prevented AUD/USD from falling in line with its head and shoulders top pattern. Whilst it technically remains in play whilst prices remain below the neckline / 0.7677, we would usually expect any decline following a H&S breakout to occur quite quickly, so the bearish reversal pattern is now in doubt.

GBP/AUD remains above its lower trendline of the bullish channel, yet the bias remains for a downside break. Last week produced a bearish engulfing candle and we would take a break of last week’s low as a sign that its next leg lower is underway.

Canada’s solid employment data on Friday saw CAD crosses extend their lead on Friday. GBP/CAD has fallen to a 16-moth low in early Asian trade, AUD/CAD and NZD/CAD appear to have topped and USD/CAD looks ready to drop further in line with its daily bearish trend.

CAD/JPY appears to have carved out its low and momentum has realigned with its bullish trend. A small hammer on Friday suggested its 6-day correction was becoming long in the tooth and Friday’s bullish candle all but confirmed the low to be in.

Prices have retraced slightly today in Asian trade but prices are now back near last week’s high to suggest price acceptance. We are now looking for prices to remain above Thursday’s hammer high and break above last week’s high.

  • A break above last week’s high assumes bullish resumption.
  • The initial target is the 88.30 high.
  • The trend remains bullish above 86.50 although the Thursday’s high can be used to aid with risk management.

From the weekly COT report (Commitment of Traders)

As or Tuesday 6th April

  • Only minor adjustments were made to FX majors positioning last week. AUD futures saw the biggest change with net-log exposure being trimmed by -9.2k contracts, taking net-long exposure to just 4k contracts.
  • Traders trimmed net-long exposure to the US dollar index for a third consecutive month by -1.3k contracts.
  • Yen futures remained net-short for a fourth consecutive week, although slightly reduced by -1.5k contracts.
  • Gold and silver futures saw a notable increase of net-long exposure, with bulls adding 12,250 and 3,345 contracts respectively.

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Commodities: Gold’s rally is ‘foiled’ at 1755

Gold prices found resistance around 1760, although held above the 20-day eMA. Due to the significance of 1764 resistance then a tussle around current levels could be expected. Whilst the bias remains for an eventual break above 1764 we’re also on guard for another dip lower, and a break of Friday’s low could be the clue its about to head lower.

Copper is holding above $4.00, yet its inability to sustain bullish momentum after originally gapping out of a triangle and above $4 is a concern for the bull case. We’ll continue to wait for bullish momentum to return but, until then, it’s a step aside for us.


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