CM – European Open: AUD higher after RBA meeting, FTSE cracks 7100?

Matt Simpson
August 3, 2021 6:02 AM

The Delta variant spread weighed on sentiment, with Hang Seng and STI falling -0.75%. The Nikkei 225 is currently down -0.8%. The ASX 200 has been pulled back from its record high, weighed down by falling gold stocks. However, prices are building a support level just above 7,460. And at just -0.2% lower, it’s relatively undamaged by the coronavirus concerns observed overnight. At the other end of the scale, chipmakers led the KOSPI 200 0.3% higher, although it was the China A50 Index that was the strongest at the time of writing, up 0.8%. The futures markets opened lower in Europe, indicating a soft opening in the cash markets.

The FTSE 100 traded briefly above 7100 yesterday but found resistance at the weekly R1 pivot before returning some early gains and closing at 7082.76. The price movement on the daily chart remains restless overall and has effectively been between 6,800 and 7,200 for over 3 months. However, a bullish trend is forming on the hourly chart as dips continue to be bought and there is a support group around 7000 that includes the weekly and monthly pivot points. In addition, a bullish marabuzo opening candle formed above this level in the first hour of trading to show increased demand. We therefore favor a break to new highs before breaking below 7,000 at this point, with the next major resistance at 7100-7217.54.

The RBA meeting wasn’t as low-key as it could have been. Apparently, rates have been held at a record low of 0.1%, although bond purchases have not risen, as some had speculated. They will continue to buy A $ 5 billion a week through September and then cut it down to A $ 4 billion by at least November. Assuming the majority of the population will be fully vaccinated by the end of the year, they expect growth of just over 4% in 2022.

The Australian dollar is now the strongest major of the session as shorts are covered and up 0.6% against the CAD and 0.5% against the CHF. At the time of writing, AUD / USD has just broken through 0.7400 and is considering breaking above last week’s high.

Canada’s manufacturing PMI slid to a 4-month low in June, although it remains an all-time high at 56.5. The July data is released today at 2:30 p.m. BST and is expected to rise slightly to 56.8. Well, what if it falls short of expectations, as it did in the US? As ISM manufacturing is softening, it is plausible that Canada could follow suit. And since the ISM weighed on oil prices and stocks and the CAD is sensitive to risk sentiment and oil prices, the focus is on CAD / JPY should today’s PMI also miss. A break below 87.00 implies a bearish continuation.

EUR / JPY is holding above 129.50 support, but given yesterday’s large bearish candle below a resistance cluster, we are still waiting for a bearish breakout.

USD / CHF remains in a downtrend on the 4-hour chart as prices consolidate around 0.9050 / high from June 4th. It would not be unreasonable to expect a rebound from current levels towards 0.9100 which is the weekly pivot and May 13th. And around that level, we’d like to re-explore potential shorts to target 0.9000.

The oil price is stabilizing overnight after falling over 3% yesterday. Support was found on the 50-day eMA, but resistance is at $ 72 with the monthly pivot point. As long as prices stay below that, we suspect the prospect of a surge to $ 70, which in itself is a critical figure to monitor. But as we noted in today’s video, the energy sector appears to have seen a boom, with the SPDR Select Energy ETF being used as a proxy for the energy sector.

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

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