AUD/JPY, ASX 200 forecast: Asian Open – April 3, 2024

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 5^th 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

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

Follow Matt on Twitter @cLeverEdge