Last night saw these trends continue to develop with the DXY Dollar Index gaining 0.3% and closing above its key resistance level of 94, while news that Canada’s wild fires were moving away from oil processing facilities saw WTI oil fall 2.8% to its lowest level in two weeks. Commodities are set for a tough time in a stronger US dollar environment, but news that China may be pulling back on its aggressive 1Q stimulus is also driving prices lower. The iron ore price collapsed 5.7% overnight, sending Rio Tinto’s London listing down 8% in the FTSE.
The ASX is set to open 0.1% lower, but energy stocks and the materials sectors are clearly going to weigh down the index so the banking and financial sectors are going to have to do some heavy lifting today to halt a major decline in the index. Although two other trends are increasingly evident in helping certain stocks in the ASX: a weaker Aussie dollar and fear about a market pullback.
The Aussie dollar dropped another 0.7% last night, cumulatively losing 4.7% over the past five sessions. On a technical basis, the Aussie looks like it has plenty of room to fall further, after breaking through a key support level at US$0.7350 overnight. On the Ichimoku Cloud chart, price has also broken through the cloud and the leading Senkou lines are now indicating that it is in a downtrend. The Aussie looks to be heading to the US$0.71-$0.72 level this week.