European Open: RBA Release Dovish Minutes, Futures Point Higher

Whilst nobody expected RBA’s minutes to be hawkish, they did have a more dovish tilt as they suggested they could be a long way off from removing QE.

Uptrend 4


Asian Indices:

  • Australia's ASX 200 index rose by 75.4 points (1.03%) and currently trades at 7,387.70
  • Japan's Nikkei 225 index has risen by 283.03 points (0.97%) and currently trades at 29,444.53
  • Hong Kong's Hang Seng index has fallen by -219.38 points (-0.76%) and currently trades at 28,622.75

UK and Europe:

  • UK's FTSE 100 futures are currently up 23 points (0.32%), the cash market is currently estimated to open at 7,169.68
  • Euro STOXX 50 futures are currently up 18 points (0.44%), the cash market is currently estimated to open at 4,150.67
  • Germany's DAX futures are currently up 63 points (0.4%), the cash market is currently estimated to open at 15,736.64

US Futures:

  • DJI futures are currently down -85.85 points (-0.25%)
  • S&P 500 futures are currently up 17.75 points (0.13%)
  • Nasdaq 100 futures are currently up 7.5 points (0.18%)


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Indices

The ASX 200 rallied straight from the open to hit a new record high, as RBA’s minutes revealed the potential for QE3. It was the strongest major index overnight with the Nikkei 225 close behind with a 1.01% gain. He Hang Seng was down -0.8% after China Gas endured its worst day’s trade in 11 years following a gas explosion.

Futures markets point to another strong open with ESTOXX 50 and DAX futures currently up 0.4% and FTSE up 0.32%. US futures have also opened a tough higher, led by S&P 500 E-minis.


Despite a strong start and a 0.8% rally, the FTSE 100 struggled to hold onto early gains and closed just 0.15% higher. Although perhaps more worrying is the fact it closed with a bearish pinbar on the daily chart after a failed intraday break above the May high. A break beneath 7129 confirms the bearish reversal candle but we may find this acts as strong support given it was yesterday’s opening price and Friday’s POC (point of control – where the most trading activity took place). Regardless, with the FTE expected to open higher we’d see signs of support building above 7160 during early trade as a bullish sign for the day.


FTSE 100 S/R Levels

  • R3: 7200 - 7204
  • R2: 7188.26
  • R1: 7169 - 7172
  • S1: 7159.50
  • S2: 7147
  • S3: 7129 – 7131.80
  • S4: 7118 – 7120
  • S5 - 7100


FTSE 350: Market Internals


FTSE 350: 7146.68 (0.18%) 14 June 2021

  • 173 (49.29%) stocks advanced and 163 (46.44%) declined
  • 32 stocks rose to a new 52-week high, 3 fell to new lows
  • 85.75% of stocks closed above their 200-day average
  • 20.8% of stocks closed above their 20-day average

Outperformers:

  • + 8.65%   -  Tullow Oil PLC  (TLW.L) 
  • + 4.64%   -  Serco Group PLC  (SRP.L) 
  • + 4.06%   -  Volution Group PLC  (FAN.L) 

Underperformers:

  • -4.34%   -  Restaurant Group PLC  (RTN.L) 
  • -4.17%   -  International Consolidated Airlines Group SA  (ICAG.L) 
  • -4.09%   -  Rolls-Royce Holdings PLC  (RR.L) 


Forex: AUD/NZD takes the hit on dovish RBA minutes

Think ranges across currency pairs overall, but NZD is the strongest currency. The Australian dollar took a dip lower on the release of RBA’s minutes which stated it was “premature” for the RBA to cease their QE program. This makes it the more likely RBA will retain their dovish stance, so the currency could come under further pressure from NZD and CAD as RBNZ and BOC are the more hawkish of the three. AUD/NZD fell -0.3% to a two-day low after the minutes were released.

The US dollar index (DXY) closed to a six-day high yesterday ad is probing a cluster or resistance levels (last week’s high, a broken trendline and the 50-day eMA). This makes the 90.50/60 area a pivotal zone and potentially one of importance around tomorrow’s FOMC meeting.

EUR/USD trades within yesterday’s bullish inside day, which is just off-of Friday’s lows. We expect the pending FOMC meeting may suppress volatility but if we must pick a direction it would be for a minor technical bounce from current levels.

USD/CAD has dipped beneath its 1.2144 breakout level and the potential bullish flag is not exactly pleasing to the eyes, but it has formed a higher low at 1.2124 at its H4 20-day eMA. We may need to wait for tomorrow’s FOMC for its next directional move, but the bias remains for a run towards the initial target at 1.2200.

USD/JPY reached our 110 target yesterday. Admittedly later than we’d hoped – but it got there none the less. 110 provided support during overnight trade so we have our pivotal level for today’s European and US sessions.

GBP/JPY is sticking to the retracement line mentioned in the Asian Open report. We continue to suspect its corrective low has been seen at 154.10 and would welcome any low volatility dips ahead of the anticipated breakout. Note the cluster of support from several eMA’s around 154.95 on the 4H chart.


Given yesterday’s bullish engulfing candle, we think it’s time to outlay a bullish scenario for AUD/JPY. Previously we noted its inability to hold onto gains above 85.00 so were looking out for a break of trendline support, during a risk-off move. With indices and risk sentiment in general leaning more to the positive side, the series of higher lows on AUD/JPY during an established uptrend, we should also be on guard for a break (and daily close above 85.00. Although a more cautious approach is to wait for a break of recent highs at 85.20.


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Commodities:

Oil prices remained flat overnight and traded in a tight range, just off their two-year highs. WTI futures sit around 71.13 and brent at 73.15. The stronger dollar may have capped upside, but it has not yet been enough to turn its trend.

Gold prices also remained anchored to yesterday’s close price after a volatile session. We find it difficult to have a directional bias ahead of the FOMC meeting, so prefer to step aside until after it.


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