AUSTRALIAN DOLLAR, SNAPCHAT EARNINGS, S&P 500, CHINESE YUAN AND TARIFFS – ASIA PACIFIC MARKET OPEN
- Australian Dollar rally risks reversing alongside S&P 500 on Tuesday
- Snapchat earnings disappoint, sending social media stocks tumbling
- Chinese Yuan in focus as US President Joe Biden promises tariff review
MONDAY’S MARKET RECAP – SENTIMENT ON THE MEND, OR AT LEAST IT WAS
Global risk appetite was on the mend to begin the new trading week. S&P 500, Dow Jones and Nasdaq 100 futures rallied 1.85%, 2.01% and 1.64% respectively. As a result, the sentiment-linked Australian and New Zealand Dollars outperformed. The haven-linked US Dollar weakened, especially as the Euro soared on news that the European Central Bank brought forward rate hike expectations for the third quarter.
Or at least that is what it seemed. Right after stocks closed for trading on Wall Street, Snapchat announced its latest earnings report. The social media company estimated that revenue and adjusted Ebitda (earnings before interest, tax, depreciation and amortization) will be below the low end of guidance. Snap also said that the macroeconomic environment has “deteriorated further and faster than anticipated”.
As a result, Snap Inc. saw its share price drop a whopping 30 percent in after-hours trade – see chart below. There was a domino-like impact on other corners of the market. Facebook/Meta shares declined about 7.5%. This also sent S&P 500 futures into the red, evaporating a decent chunk of gains seen from Monday’s trading session.
SNAP POST-EARNINGS MARKET IMPACT
Chart Created in TradingView
TUESDAY’S ASIA PACIFIC TRADING SESSION – AUSTRALIAN DOLLAR, ASX 200, CHINESE YUAN
The turnaround in risk appetite is leaving the Australian Dollar and New Zealand Dollar at risk for Tuesday’s Asia-Pacific trading session. Anti-risk currencies like the US Dollar and Japanese Yen could benefit. This is also for what is going to be a quiet day in terms of economic event risk, placing the focus for traders on general risk appetite.
This may also leave regional stock exchanges vulnerable, placing the ASX 200, Nikkei 225 and Hang Seng Index at risk. The Chinese Yuan has also been getting some attention lately. USD/CNH fell 1.47% in the worst drop since November 2020 last week. Overnight, US President Joe Biden announced that he would review Chinese tariffs imposed by the previous administration. The Yuan rallied some more. That could introduce more demand for Chinese goods, driving capital flows and boosting the local currency.
AUSTRALIAN DOLLAR TECHNICAL ANALYSIS
On the daily chart, AUD/USD broke above a falling trendline from April. Further upside confirmation could hint at more gains to come, placing the focus on the early May high at 0.7269. The 50-day Simple Moving Average is also not far off from there. Otherwise, turning back lower could open the door to resuming losses since April towards June 2020 lows.
AUD/USD DAILY CHART