Asian Open Biden calls for 2 trillion spending splurge

Asian Futures:

• Australia's ASX 200 futures are down 0 points (0%), the cash market is currently estimated to open at 6,790.70
• Japan's Nikkei 225 futures are up 160 points (0.55%), the cash market is currently estimated to open at 29,338.80
• Hong Kong's Hang Seng futures are up 230 points (0.81%), the cash market is currently estimated to open at 28,608.35

UK and Europe:

• The UK's FTSE 100 futures are down -54.5 points (-0.81%)
• Euro STOXX 50 futures are down 0 points (0%)
• Germany's DAX futures are up 9 points (0.06%)

Wednesday US Close:

• The Dow Jones Industrial fell -85.41 points (-0.26%) to close at 32,981.55
• The S&P 500 index rose 14.34 points (0.37%) to close at 3,972.89
• The Nasdaq 100 index rose 194.909 points (1.51%) to close at 13,091.44

Of course, someone will have to pay for all this and so far it looks like it will be corporate America and the wealthy (assuming one considers a salary over $400k per annum to be wealthy these days). Speaking in Pittsburgh, Biden pitched The American Jobs Plan which would see a large investment in infrastructure, competitiveness and job creation. But, as you can imagine, his plan to increase corporate rates rise 28% from 21% and close loopholes which allows companies to move profits overseas went down like a led balloon with conservatives and major business groups. And it was enough for Republican leader Mitch McConnell to all of a sudden have a problem with adding “trillions more” to the national debt. Oh, the irony, even if he is correct.

US futures were little changed but if this goes ahead Wall Street will have to weigh up the costs versus the benefits. Can corporate America remain ‘competitive’ with higher rates? And will it weigh on stocks and if so, which ones? But this is assuming Biden will get it over the line and, if prior package are anything to go by, it may not be ironed out and agreed upon as soon as this month as planned.

Indices: Wall Street mixed, Hang Seng forms potential swing high

It’s the last trading day of the week due to Easter Friday for US equities, and we’ll have to wait and see how the index holds up after Biden’s talk. The S&P 500 (+0.3%) saw an intraday record high yet closes with a small bearish pinbar, back beneath Monday’s high. Technology and utility sectors were the strongest whilst financials and energy were the weakest, whilst 289 stocks declined and 215 advanced.

• The Nasdaq 100 (+1.5%) closed to a 2-week high and back above its 10 and 20-day eMAs. The Dow Jones (-0.26%) printed a second consecutive bearish close after its record high yet doesn’t trade too far below it.
• The ASX 200 is set to open higher today after printing a bullish outside candle yesterday. Yet its high also struggled to break 6850 resistance, a level which has held on five occasions since the 25th of March. Until it breaks its likely to tempt bears to fade into and, if it does break, the next resistance level is not so far off at 6938. So we’re not overly excited by its bullish prospects at present.
• The Hang Seng printed a bearish engulfing candle yesterday and the 20 and 50-day eMA capped as resistance. Given this follow on from two Doji’s we suspect a swing high has formed.

Forex: Canadian GDP was a beat

Canada’s rather timely monthly GDP for January rose to 0.7% from 0.1% previously, making it the ninth consecutive month of growth. Manufacturing and wholesale trade were the driving factors, and the goods-producing sector accounted for 1.5% compared with 0.4% for service sector growth. Still, as good as these numbers are growth still remains 3% lower than before the pandemic. But the numbers may be good enough for BOC to trim their asset purchases when they revise their growth outlook this month.

The Canadian dollar was the strongest major of the session and USD/CAD was the weakest pair, amid its worst single day in three weeks. Technically it may be trying to carve out a top, and a weak NFP print tomorrow could be enough to send it rolling over. CAD/JPY was the strongest pair and closed to its highest level since October 2018. AUD/CAD fell to a four-day low in line with our bearish bias outlined in yesterday’s European Open report, and a break beneath the 0.9535 low brings the December low into focus.  

• The US dollar index (DXY) produced an indecision candle at its highs in the form of a Spinning Top Doji to and close on the 11th November swing high. AUD/JPY hit an 8-day high in line with our bullish bias. Yet with two upper wicks over the past two days heading into long weekend, we’d be happy to square up if long. It’s not too far from our 85.00 target anyway.
• AUD/NZD touched a 6-day low after printing a series of reversal candles below the 1.0936 high. Yet the downside lacks momentum, so bears would be wise to tread cautiously ahead of the long weekend if already short and perhaps consider stepping aside.
• AUD/USD printed a bearish pinbar inside day. The bias remains bearish below 0.7664 but we want to see a break beneath the 0.7557 neckline to confirm a multi-month head and shoulders top pattern.

NZD/USD to break key support?

The support level NZD/USD has stalled above is a pivotal level as it was previously the Jan and March 2019 highs. Yet due to the strong bearish trend that has developed since topping out in February we favour an eventual break beneath it. If prices break lower without testing this week’s high first, then the 0.7032 resistance is confirmed as the swing high (and latest lower high) of the bearish trend on the daily chart.

• A break below 0.6943 assumes bearish continuation, and the bias remains bearish below 0.7320
• A break lower brings the 0.6800 handle into focus for bears.
• A break above 0.7032 warns of a deeper retracement against the trend and brings 0.7100 resistance into focus.

Commodities: Gold bulls put up another fight

Gold posted a solid rebound from 1767 support and closed above 1700. Yet it was a ‘long’ way to go to recoup to turn its trend around and convince bears they have lost the battle. Silver also attempted to pick itself up from its lows and closed back above its 200-day eMA. Yet in both cases it’s too soon to call any bottom in these markets.

After three days of coiling price action, brent broke out of compression to the downside. Volatility is still lower compared to the choppiness of last week but, after struggling to break above $65, the bias is now skewed to the downside heading into the long weekend.

Copper prices remain confined within a symmetrical triangle on the daily chart, although any downside break may be scuppered by the bullish trendline from the October low. We doubt to see this materialise this week but we would confirm a break above the 4.16 high as a resumption of its bullish trend.

Up Next (Times in AEDT)

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