Australian shares ended higher last week to log their best week in six. Investors looked past lockdowns in Melbourne and Sydney as mining and healthcare rallied strongly.
The Australian healthcare sector, which makes a bulk of its earnings in US Dollars, was the top gainer on the index as the US dollar gained against the Australian dollar.
Major mining stocks also rallied higher with BHP reaching a new all-time high as iron ore prices ticked higher and as brokerages expect the iron miners to gain from increased iron ore shipments and higher prices.
The news, however, was not all rosy with the Australian state of Victoria ordered into lockdown from Friday 16 July following a spike in Covid19 cases, joining Sydney as they battle an outbreak of highly infectious Delta variant.
A worldwide surge in fast-spreading Delta variant also revived fears across the World markets that the global health crisis is far from over and resulted in US markets going into a nosedive. Mounting infections of Coronavirus globally and persistent inflation fears in the USA have renewed investors’ worries and should reflect in Australian markets as they enter into next week.
The bullish investor sentiment also dipped last week to its lowest level since October 2020, signalling a rise in bearish sentiment with investors concerned about inflation, low growth, low bond yields and revived global health crisis fears.
To put it in perspective there have already been more COVID related deaths in just six months of 2021 than the entire 2020 globally. In addition, last week saw a 12% increase in coronavirus cases worldwide with the Delta variant now being the dominant variant and responsible for a worldwide surge in cases.
Gold prices fell on Friday as a strong US dollar weighed in, however, ended the week higher for a fourth week in a row.
A stronger US dollar and perkier yields on Government treasury bonds are beginning to undercut some buying appetite for the yellow metal. Higher strong US treasury yields will likely be a catalyst in a dip in gold prices next week. However, the good news is that gold’s fundamental and technical setups are both much more bullish now. As such we have now switched our opinion from selling into rallies to buy into any dips below USD 1800.
Having said that, as investors begin to fret about the spread of the COVID19 Delta variant and the fitful reopening of the global economy, as well as concerns US markets are topping out, it may impact gold bugs negatively.
Oil prices ended the week lower as investor sentiment was sapped by expectations of increased supplies and concerns that arise in global coronavirus cases, leading to more lockdown restrictions and depressing demands.
OPEC nations on Thursday said that it expected world oil demand to go up next year to be around levels seen before the pandemic, led by demands in the US, China and India. However, the rise of the highly infectious Delta variant raised concerns about triggering new lockdowns that would likely reduce recent bullish oil demands. Britain reported its highest number of new COVID19 cases in more than six months on Friday and in the USA, Los Angeles County reimposed its mask mandate over the past weekend. Both this news have added to concerns that the pandemic is far from over and there may be more lockdowns to come, thus impacting oil demand.
The Australian dollar continued to decline against the US dollar and continues to look very threatened. With no reprieve from COVID cases in NSW and Victoria joining the lockdown the Australian dollar looks like will probably break down again.
The 50 days EMA for the Australian dollar is also moving towards the 200 days EMA to form the death cross which long term traders pay close attention to. As Australia continues to lock areas of the country down and with lockdown set to extend next week, this can be no good news for the economy.
As such a break below the 0.7400 level may see the Australian dollar much quicker again towards the USD0.70 mark as it will be a break of significant support.
Indians in Australia planning to send money home can expect exchange rates Australian Dollar against the Indian Rupee continues to trade between a tight range of 55.20 and 55.60. The expectation is that an increase in high imported commodity prices may weaken the Indian currency, however, an intervention from the Central Bank in India and lockdown in Australia will limit any rise in Australian currency.
In the world of Cryptocurrencies, Bitcoin lost close to 10% in value against the US dollar. While the support around USD 30,000 remained intact a bear crosses between the 50/200 moving averages and 100/200 moving averages signal bears taking strong control.
A break below USD 30,000 is expected to result in a drop to the Fibonacci level of 61.8% from its peak at $27,169 followed by a retracement to a viable target of Fibonacci 76.4% at USD 18,256.
China’s crackdown on Bitcoin have also resulted in very low trading volume in cryptocurrencies and there does not seem to be enough fiat currency to boost the crypto market in the near short term.
In agricultural products, corn futures recorded their biggest weekly climb in 10 years as prices extended after a US government report showed lower than expected plantings and dry weather shrinking world supplies. Wheat and soybean also rallied to end the week higher for the first time in four weeks.
This week the traders will be keeping a close eye on weather forecasts for direction. The dry season has raised concerns in regards to food supplies globally. There are a couple of rain events likely next week which may help the farmers globally however the weather forecast is offering no comfort that the rain will arrest a drop in yield in dry farmlands.
As such the traders shall be closely watching the amount of rain from these rain events.
Author: Ateev Dang is a trader and trading coach by profession. He runs Glow trades Pty Ltd where he teaches anyone interested in starting on their trading journey on how to trade. He can be contacted at adang@glowtrades.com.au.
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