Dollar Index rebounds, commodities weigh on equities

The ASX 200 index sank 1.54% on Wednesday, erasing most of its gains following the RBA’s rate cut a day earlier.

The ASX 200 index sank 1.54% on Wednesday, erasing most of its gains following the RBA’s rate cut a day earlier.

BHP Billiton, Australia’s biggest resource company, plunged 9% after it was named in a $44 billion law suit over a dam rupture in Brazil.

Woolworths, the country’s largest supermarket chain, sank 7% after its issuer rating was downgraded by S&P to BBB from BBB+. The commodities slump also plays a role, with basic metals - namely aluminium, copper and zinc - all coming off sharply from recent highs.

Singapore
Singapore’s Straits Times Index extended its losses for a fifth day, closing 35 points or 1.3% lower.Lacklustre earnings has also loomed the market outlook.

SembCorp Industry’s Q1 earnings fell 25% year on year, mainly dragged down by lower contributions from its marine business, which plunged to S$33.5 million from S$64.7 million a year ago. Jardine C&C has plunged as much as 20% from its April high after disappointing Q1 earnings, due to sluggish demand in the Indonesian market. Great Eastern’s Q1 earnings plunged 56% due to unrealised mark-to-market investment losses. This has also indirectly affected OCBC’s earnings.

Trump
Donald Trump became the presumptive Republican nominee as his main competitor Ted Cruz exited the race,after his defeat in Indiana. This brings Trump a step closer to the presidential battle with Hillary Clinton, who is considered to be the most promising candidate of the Democrat party. However, Trump’s victory is probably the least desirable outcome from the Street's perspective, as his unpredictable opinions are likely to bring more uncertainty to the markets, which investors tend to dislike. The S&P 500 Index was down 0.6% last night.

FX
The Dollar Index traded higher to 93.28, extending the two-day gains after testing the recent low of 92.00. USD/JPY rebounded to the 107.00 area, as three days of Japanese holidays have given the market the time needed to cool down after the drastic move recently. Immediate support and resistance levels for USD/JPY are at 105.20 and 108.30 respectively. EUR/USD slid to 1.1480 from an eight-month high of 1.1590 two days ago. GBP/USD also came down to 1.4500. AUD/USD headed lower dragged by soften metal prices.

Commodities
Crude oil prices rebounded due to lower than expected US DoE weekly crude inventory increase released last night. The inventory increased by 2.78 million barrels, lower than some analysts’ forecast of 7.5 million barrels. WTI crude oil was traded at $44.5 this morning, getting closer to its short-term support at $43.00. A stronger US dollar weighs on commodities. The gold price retraced to $1,281 this morning from its 15-month high of $1,300 two days ago.

BHP Billiton Ltd (Australia)

Key technical levels to watch:

  • Immediate support levels: 18.30, followed by 16.00
  • Immediate resistance level: 19.46, followed by 21.00
  • MACD converged and dead cross formed

USD/CNH

Key technical levels to watch:

  • Immediate support levels: 6.4700
  • Immediate resistance level: 6.5200, followed by 6.5700
  • Stagnant channel formed

CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.