The US dollar continued to strengthen overnight, sending euro, Aussie and therefore the Kiwi to 9-month lows following hawkish FOMC minutes.

Asian Indices track Wall Street lower

Share markets were lower overnight as they took Wall Street’s lead after hawkish FOMC minutes were released. Whilst divisions remain among the ranks over the speed of the economic recovery, the bulk of members now foresee tapering to start this year.


The Hang Seng was the weakest performer, down -1.9% today and -3.9% for the week, the Nikkei was down -0.7% and therefore the TOPIX fell -0.6%. 


The FTSE 100 found resistance at 7200 yesterday before finding support at the July 19th trendline, yet still closing lower. Futures markets suggest the FTSE will open beneath the trendline today, and an opportunity below 7100 assumes the bearish move may have some legs. Only a convincing break above 7224.46 puts us back to trending mode. 


Forex: Dollar breaks higher overnight

NZD was the weakest major as 21 cases have now been linked back to an epidemic in NSW, Australia. However, they think they’ve found case zero, a traveller from Sydney who was in NZ hotel quarantine. If NZ can contain the breakout and open up, NZD could appear as if low hanging fruit during a few week/s thanks to RBNZ’s hawkish pause.


NZD/USD and AUD/USD fell to their lowest levels since November. Australia’s percentage fell to 4.6%, but it had been thanks to a lower participation as against people finding jobs. 2.2k jobs were added, 6.44 of which were part-time so full-time jobs actually dipped by -4.2k. 


The US dollar was the strongest major overnight and traded higher against all its peers. Weak oil prices helped USD/NOK rise 0.5%, and USD/CAD rose to a 5-month high. The US dollar index (DXY) also breached the March 2021 high to a trade to its highest level since November as EUR/USD fell below key support to succeed in a 9-month low.


We can see on the 1-hour chart that momentum turned lower after printing a selling tail (large upper wick) during yesterday’s US session. The dollar strengthened at the top of the session and continued its move throughout Asian trade, although a bullish pinbar has formed at the weekly S2 pivot level. Given the importance of the March 2021 low its possible we may even see a shakeout which could end in a retracement back towards that key level as party of a countertrend move. Beyond this however we’d be keen to explore bearish setups below 1.1692 - 1.1700 resistance zone, should they arise.


Commodities:

Copper futures probed the June low overnight after closing firmly beneath the March trendline. A move towards $4.00 seems feasible, whilst an opportunity beneath the three .943 low warns of a way larger downside move. 


WTI is probing yesterday’s lows around 64.30 under US dollar strength. Assuming EUR/USD can bounce as we suggested then this leaves some wriggle room for oil prices to also bounce. But as for a way far that yet remains to be seen.


Gold is trading during a potential bull flag on the dour-hour chart and, compared other metals, is holding up against US dollar strength. For gold to rally from here we’d got to see the US dollar index reverse bac below the March high. Until then we expect gold to stay during a corrective phase.