AUD/JPY and the ASX 200 look set to diverge with the former strongly hinting at a swing low and the latter failing to hold above 7900 on Tuesday.
By :Matt Simpson, Market Analyst
Market Summary:
- Odds of a June Fed cut have fallen below 50% following Monday’s strong ISM manufacturing report, although Fed fund futures still favour a June cut with a 61.6% probability.
- US bond yields rallied for a second day, the Dow Jones fell around -1% and led the Nasdaq 100 and S&P 500 lower and the VIX rose to a 2-week high as markets repriced in the ‘higher for longer’ narrative
- Regardless, the US dollar retraced after traders presumably booked profits when the US dollar index tapped 105 on Monday, resulting in a mild pullback from its 6-week high
- AUD/USD bounced from the March 5th low and closed back above 65c in line with yesterday’s bias, to further underscore we’re not witnessing a head and shoulders top.
- The RBA said it plans to change how it provides liquidity to the banking system, through regular money market operations to provide ample liquidity
- The BOE are considering mimicking the Fed’s ‘dot plot’, to show where members think interest rates could be in the future whilst remaining anonymous
- The relentless rally on gold continued higher for a seventh day, with spot prices rising above $2080 and closing just off the daily high
- The equally-weighted gold basket was also at a record high to show the rally is based on gold strength, not on US dollar weakness
- Crude oil prices continued higher, above my prior $84 target and closing comfortably above $85 on supply concerns ahead of today’s OPEC meeting, with Ukraine continuing to attack Russian oil facilities
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Events in focus (AEDT):
- 09:00 – Australian manufacturing, construction index (AIG)
- 11:30 – Japan Services PMI
- 12:45 – China services PMI (Caixin)
- 20:00 – Eurozone inflation, unemployment
- 20:15 – OPEC meeting
- 23:15 – ADP employment change
- 00:45 – FOMC member Bowman speaks, US services and composite PMIs (Final – S&P Global)
- 01:00 – ISM services PMI
- 03:00 – Fed Goolsbee speaks
- 03:10 – Fed Powell speaks
ASX 200 technical analysis:
- The ASX 200 cash market reached a fresh record high on Tuesday with a intraday break above 7900, although it closed back beneath that key level to form a narrow-ranged doji at the highs to hint at trend exhaustion (see the daily chart here)
- The ASX 200 futures chart formed a 3-day bearish reversal pattern at the highs (evening star formation) which also hints at a pullback.
- The 1-hour chart of the ASX 200 futures chart shows momentum turned swiftly lower before consolidating around 7880.
- We saw a bounce in the final hour of NY trade, but the bias is to fade into rallies up to the 7920-7935 level for a move towards support zones around 7860, 7835 or 7800 / lower trendline
AUD/JPY technical analysis:
The daily chart shows an established uptrend for AUD/JPY, which entered a corrective phase after its failed ‘bid’ to close above 100. After a 7-day correction, a bullish engulfing day formed above the 61.8% Fibonacci retracement level to hint at a swing low. It also closed above the 2022/2023 highs. What is also interesting is that the potential ow landed right in the 40-47 day cycle estimate which I highlighted back in February. RSI (14) is curling higher above 50 and RSI 2 is above 50 after touching the oversold zone on Monday.
The bias remains bullish above this week’s low, and bulls could seek to enter dips within Tuesday’s range in anticipation of a break above 99. The upside target is open, although 99.50 and 100 make obvious resistance levels to expect some sort of profit taking along the way.
– Written by Matt Simpson
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https://www.forex.com/en-us/news-and-analysis/aud-jpy-asx-200-forecast-asian-open-2024-04-03/
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