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March 2, 2021, 6:20 a.m.
It was a mixed picture for stocks across Asia today, with stocks in Japan and China trading lower for the most part, the ASX 200 essentially flat, and major indices for South Korea, Singapore and Taiwan higher.
Only consumer staples and the financial sector finished higher on the ASX 200, with Energy, Materials and Industrials each falling over 1%. Energy stocks were lower as oversupply concerns weighed on oil prices, sending WTI back to $ 60 ahead of Thursday’s OPEC meeting. However, overall volatility was limited. Gold Resources (GOR.AX) were the weakest stocks in the index, falling -7.5% in line with gold prices, which hit new lows, falling to 1,706.
The Nikkei 225 was under pressure due to poor CAPEX (capital expenditures) data. It found that Japanese companies had cut spending on large equipment for the third year in a row as manufacturers continued to cut costs.
The USD is a little firmer, with the US dollar index (DXY) rising 0.2% to a 3-week high. EUR / USD broke quietly below the 1.2023 low in Asian trading, but with the 100-day eMA and 1.2000 grip close by, we are on the lookout for a false break and higher corrective jump. USD / CHF closed above its 200-day eMA yesterday and prices remained in a tight range near yesterday’s highs. The next big resistance is at 0.9200 which is about 45 pips away.
GBP / USD printed a 2 week intraday low but prices have since bounced back above 1.3888. If bears fail to conquer this level, it can result in a minor, technical-related rebound. GBP / AUD hit a 2-day low following the RBA meeting and was back below its 100-day eMA. Last week’s rally appears to have peaked after encountering resistance at its 200-day eMA on Friday.
USD and CHF are the strongest major stocks right now, while GBP and CAD are the weakest. Although it was a quiet session overall, with all couples staying well within their 10-day ATRs (Average True Ranges).
The Reserve Bank of Australia kept rates predictably at 0.1%, where they are expected to hold them until inflation rises comfortably within their target range of 2-3%. The RBA believes that the economy still has significant spare capacity and that it will take “significant gains” for employment to achieve its goals. In addition, wage growth must also be “significantly higher”. And they don’t expect that until 2024. Dovish will be then!
It appears that the bond purchase doubled on Monday could have been a one-off event, as opposed to a change in dynamic, as their statement pointed out that bond purchases were « Moved forward this week to support the smooth running of the market ». However, they will continue to respond to “market conditions” (translated as “higher bond yields”) if and when necessary.
The Australian dollar gave little response, although expected as there were no surprises at today’s meeting. The ASX 200 gained 70 points, but is now trading near its opening price at 6,785.
With Canadian GDP data released later in the US session and the recent recovery of the US dollar, we are looking for bullish opportunities for USD / CAD.
Recent price action on the weekly charts has made us question whether USD / CAD has already hit a significant low. The February candle spawned a rikshaw man doji, and last week’s candle spawned a « buy tail » (lower wick) after the bears failed to keep prices below the January 2021 and April 2018 lows.
The switch to the hourly chart shows that a bullish candle has formed on the 50-hour eMA and prices are now above their highs, suggesting that there is a swing low. The low also respected a 38.2% Fibonacci retracement level. Given the strength of the rebound from the 1.2465 low, we suspect that recent price action is corrective and the bulls will attempt to target the highs around 1.2746 / 63.
You can view all of the events scheduled for today in our economic calendar and keep up to date with the latest market news and analysis here.
German retail sales are expected to drop -0.3% in January, though there is a risk of a downside surprise in the event of lockdowns.
Canadian GDP is projected to be 7.5% in the fourth quarter, far from the 40.5% recovery in the third quarter, but still admirable. A downside surprise should help USD / CAD rise in line with our bullish bias, while more pressure could limit the upside.
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