Asian Open: DXY Coiling at Its Highs

Asian Futures:

• Australia's ASX 200 futures are down -27 points (-0.37%), the cash market is currently estimated to open at 7,272.80
• Japan's Nikkei 225 futures are down -30 points (-0.11%), the cash market is currently estimated to open at 28,468.20
• Hong Kong's Hang Seng futures are down -234 points (-0.93%), the cash market is currently estimated to open at 25,091.09

UK and Europe:

• UK's FTSE 100 index rose 51.3 points (0.72%) to close at 7,146.85
• Europe'sEuro STOXX 50 index fell -0.77 points (-0.02%) to close at 4,072.52
• Germany's DAX index fell -6.99 points (-0.05%) to close at 15,199.14
• France's CAC 40 index rose 10.55 points (0.16%) to close at 6,570.54

Monday US Close:

• The Dow Jones Industrial fell -250.19 points (-0.72%) to close at 34,496.06
• The S&P 500 index fell -30.15 points (-0.69%) to close at 4,361.19
• The Nasdaq 100 index fell -107.019 points (-0.72%) to close at 14,713.73

Indices:

Wall Street traded lower with higher energy prices continuing to fuel inflationary concerns just as earnings season kicks off. The S&P 500 fell -0.7% to a 4-day low, closing Thursday’s upside gap and the 50-day eMA has continued to cap as resistance on the closing chart. The energy sector (XLE) initially hit a 21-month high yet closed the day lower after oil’s rally lost some steam. Rising yields continued to weigh on technology stocks with the Nasdaq 100 falling -0.72% and communications services sector being the worst performer on the S&P. Traders also offloaded bonds to send yields higher to see US10Y rose to a 4-month high of 1.636.

The ASX 200 is yet to break above 7333.2 resistance, but its potential to do so remains on our radar. Yesterday’s trade printed a hammer candle with a lower wick, so a break above resistance confirms it as a bullish reversal candle whilst a break of its low confirms it as an inverted (bearish) hammer.

Futures markets point to a weak open in Asia.

ASX 200 Market Internals:

ASX 200: 7299.8 (-0.28%), 11 October 2021

• Energy (1.32%) was the strongest sector and Information Technology (-2.72%) was the weakest
• 4 out of the 11 sectors closed higher
• 7 out of the 11 sectors closed lower
• 4 out of the 11 sectors outperformed the index
• 66 (33.00%) stocks advanced, 123 (61.50%) stocks declined
• 63% of stocks closed above their 200-day average
• 40% of stocks closed above their 50-day average
• 45% of stocks closed above their 20-day average

Outperformers:

• + 6.19%-Whitehaven Coal Ltd(WHC.AX)
• + 5.26%-Fortescue Metals Group Ltd(FMG.AX)
• + 3.48%-Champion Iron Ltd (CIA.AX)

Underperformers:

• -22.9% -Star Entertainment Group Ltd(SGR.AX)
• -5.6% -Platinum Asset Management Ltd(PTM.AX)
• -5.38% -Skycity Entertainment Group Ltd(SKC.AX)

Forex:

The Japanese yen was by far the weakest major currency with all pairs far exceeding their 10-day ATR’s (average true ranges).

The US dollar continued to receive safe-haven flows alongside the yen, although yield differentials gave USD/JPY the upper hand as the pair closed above 113 for the first time in nearly 3-years. Traders appear confident the Fed will announce tapering next month despite the NFP miss, so central bank divergence is being reflected in price action.

The US dollar index (DXY) continues to coil up within a potential continuation pattern on the daily chart. Whist the trend favours an upside break, from a reward to risk perspective we would prefer to see it break to the downside first and find support around the 93.43 – 93.73 zone. Should prices break higher, take note of the September 2020 high as it makes a likely resistance level, ahead of the 95 handle and monthly R2 pivot.

EUR/AUD broke beneath 1.5780 support in line with our bias, with the daily low stopping just pips above the 1.5664 – 1.5690 support zone. Whilst this leaves the potential for another period of consolidation, our bias remains bearish beneath the 1.5858 high although we would not expect prices to trade above 1.5780 is this is part of a strong move lower. AUD/USD rose to a 19-day high after its (rather messy) breakout from an inverted head and shoulders pattern. If successful, the pattern projects a target around 0.7448. AUD/NZD closed to a 10-week high and stopped just short of our 1.0600 target.

The Bank of Korea announce their monetary policy decision at 12:00 AEST. The consensus is for them to hold rates at 0.75% today but raise it to 1.00% at their November meeting.

Commodities:

Oil prices continued higher overnight but there are warning signs of overextension for the bull camp. WTI hit a 7-year high of 82.18 yet retraced back to 80.50 by the end of the session, leaving a bearish hammer on the daily charts. So perhaps the bullish move is now running on fumes.

Palladium reached our initial target of 2185 but, like oil prices left a bearish pinbar on the daily.

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