Asian Open Oil Rallies as OPEC Talks Break Down RBA Up Next

Asian Futures:

• Australia’s ASX 200 futures are flat, the cash market is currently estimated to open at 7315
• Japan's Nikkei 225 futures have risen 70 points (0.25%), the cash market is currently estimated to open at 28668.19
• Hong Kong's Hang Seng futures are down -50 points (-0.18%), the cash market is currently estimated to open at 28093.5

European Friday close:

• UK's FTSE 100 index rose 41.64 points (0.58%) to close at 7164.91
• Europe's  Euro STOXX 50  index rose 3.06 points (0.07%) to close at 4087.37
• Germany's DAX  index rose 11.88 points (0.08%) to close at 15661.97
• France's CAC 40 index rose 14.68 points (0.22%) to close at 6567.54

US Futures:

• S&P 500 E-minis are  index down -1.25 points (-0.03%)
• Nasdaq 100 E-minis are  index down -20.5 points (-0.14%)
• Dow Jones E-minis are  index up 11 points (0.03%)

Indices:

Volumes were lower with the US exchanges closed for US Independence Day, but volumes should rise today as traders return to their desks in the US. US futures are relatively flat, and futures for Japan and China’s stock markets point towards a slightly firmer open relative to yesterday’s losses.

European bourses mostly higher, the STOXX 600 was up 0.34%, the CAC rose 0.4% whilst DAX was up just 0.08%. The FTSE 100 led the way higher on Boris Johnson’s 2-week plan to reopen the UK, rising 0.58%.

Today’s RBA meeting is the main calendar event in Asia today, and you can read Tony Sycamore’s preview here: Stronger retail sales fails to shift ASX200 – next up the RBA

The ASX200 is currently flat for the month of July, flat this week (much like last) and coiling up into a triangle on the daily chart. Hopefully some signs of life will materialise with US traders returning to their desks this week and an RBA meeting scheduled at 14:30 and speech by Governor Lowe at 16:00. 7312, 73000 and 7288 are key intraday support levels but, until we see a clear breakout of its daily triangle then smaller targets may be more applicable under current conditions.

ASX 200 Market Internals:

ASX 200: 7315 (0.09%), 05 July 2021

• 85 (42.50%) stocks advanced, 99 (49.50%) stocks declined
• 7 hit a new 52-week high, 0 hit a new 52-week low
• 73.5% of stocks closed above their 200-day average
• 64.5% of stocks closed above their 50-day average
• 50% of stocks closed above their 20-day average

Outperformers:

• + 33.9%   -  Sydney Airport Holdings Pty Ltd  (SYD.AX) 
• + 11.9%   -  Chalice Mining Ltd  (CHN.AX) 
• + 5.52%   -  Auckland International Airport Ltd  (AIA.AX) 

Underperformers:

• -5.21%   -  Clinuvel Pharmaceuticals Ltd  (CUV.AX) 
• -5.07%   -  Appen Ltd  (APX.AX) 
• -4.94%   -  Nuix Ltd  (NXL.AX) 

Forex: UK Sets out to ease COVID restrictions

Boris Johnson laid out his latest plans to end restrictions in the UK in two weeks-time, on 19^th July. It will surely become a test over to the success of the rapid vaccine rollout. A final decision will be made next week.

The British pound was the strongest major yesterday rising 0.2% against the Swiss franc, 0.12% against the US dollar. Earlier on the session the pound was about 0.6% higher against these currencies.

The US dollar index (DXY) fell for a second session although volatility was relatively tame, resulting in a small bearish Doji candle. Lack of volumes is mostly to blame so we should take such patterns with a pinch of salt.

AUD/USD is now in focus around today’s RBA meeting. In simple terms its direction (or lack of) will likely be dictated by how hawkish (bullish) or dovish (bearish) the meeting is, relative to expectations.

AUD is anchored to its 100-hour eMA and weekly pivot point. Given the strong reaction from Friday’s low then the bias is for an eventual break higher towards 0.7580, with the obvious caveat being today’s meeting. We doubt RBA will be hawkish par se but less dovish than expected could effectively be the same thing; bullish for AUD. If they discuss tapering and their forward guidance is not as dovish as expected than that could support AUD pairs and weigh on the ASX 200. Whilst sticking to dovish forward guidance and not discussing any sort of tapering could be construed as bearish for AUD.

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Commodities: Oil rallies as OPEC+ talks stall again

Talks to discuss output policy, which were already extended from last week’s failed talks, fell apart yesterday as OPEC+ members continued to clash over the pace of the reduction of output curbs (production increase). With no progress, a spokesman confirmed the meeting had been cancelled and oil prices rallied.

WTI futures rose 1.6% and edged closer to the October 2018 high of 76.90 and settled at 76.36 and brent futures rose 0.47%.

Gold prices retested Friday’s high in light trade, partly thanks to the dollar’s second bearish session. Should dollar strength resurface alongside bearish reversal patterns below 1800 then we could see another dip lower with gold prices. Otherwise, we’d prefer to see a break above the 200-day eMA (1807) before becoming too bullish on gold.

Up Next (Times in AEST)

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

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