21 June 2021 22:44

Market Mantra: Banks take Australian market to all-time high, Bitcoin suffers thanks to Elon Musk

It is expected that Aussie will continue to rally against the Indian Rupee and may go above the Rupees 57 mark next week alone.


Australian shares continued to rally last week hitting new all-time highs as banking stocks extended rally following a better than expected economic growth data. A 1.6% rally during the week helped ASX 200 to touch the 7,300 mark.

The Financial stocks reached their highest level since 10 November 2017 after positive GDP data
and Reserve Bank’s accommodative policy lifted the mood.

Reserve bank of Australia
Reserve Bank of Australia; Reprentative picture @CANVA

The forecast-beating GDP data also resulted in easing investor fears regarding the spike of Corona cases in Victoria. The investors looked past the news about the detection of the highly contagious Delta Covid19 variant.

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Energy stocks too continued to rally with Energy stocks closing 8.5% higher for the week as crude oil prices continue to remain high. China easing its policy to allow couples to have up to three children now also helped shares in A2Milk have their best week in months.

The strong GDP data has now taken Australia’s GDP above its pre-Covid level, a feat achieved by a very few countries. The data reflected a combination of better virus control and strong Government support measures and rubbished claims that we should have let the virus rip.

We would expect the GDP to take a hit though in this quarter as impact of Victoria lockdown will
impact the markets, however as vaccination increases this should only be a minor impact. We expect the stocks to continue the rally up with Westpac continuing to lead amongst the Big 4 banks.

Westpac bank; Picture Source: The Australia Today
Westpac bank; Picture Source: The Australia Today

This week we expect the NAB business survey data on Tuesday and the Westpac/MI consumer
survey data on Wednesday to show the continuing level of confidence. We also expect Chinese trade data to show continued strength in exports and a further increase in imports. Positive data would help markets rally and we think ASX 200 should find it easy to move above 7400 in the coming weeks.

An extension of lockdown in Victoria though can quickly sour the mood.

For this week we continue to remain upbeat about Finance stocks, we also are keeping a close eye on A2Milk and Synlait Milk both of which should benefit by easing restrictions in China, their top market. We also believe as vaccine intake increases globally the export base healthcare companies such as CSL and Pro Medicus will continue to gain. We are staying away from Copper miners though as Copper prices continue to plummet.

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In the crypto world last week we talked about how Bitcoin need to recover soon to at least the US 41,994. A failure to capture that price sooner can see prices retrace back to $30 K. A bounce above USD $42,000 on technical analysis can see Bitcoin reach new highs. Having said that a fall below $30,000 can dash the hopes of any recovery till 2025 in true Bitcoin fashion.

The positive recovery signs during the week, however, were crashed again on Friday when a single tweet by Elon Musk. Even though Bitcoin still gained about 6%, it dropping on Friday after the Tesla boss fired a series of tweets suggesting a breakup with Cryptocurrency sent fears amongst the crypto investors.
Even though Musk has clarified Tesla is not selling its Bitcoins, his tweet resulted in Bitcoin falling below its 20 days Moving average. However, El Salvador President announcing a bill to make Bitcoin a legal tender in El Salvador has come as fresh news and may help the Cryptocurrency recover again.

Bitcoin1
Bitcoin; Reprentative image; Picture Source: @CANVA

We continue to hold a positive bias towards Cardano in the Crypto World and believe it is best suited to recover and rally faster than other coins.

In regards to the Australian dollar, we have been mentioning how we see it losing steam, especially against the Indian Rupee. However, we have repeatedly mentioned support around INR 55.50.

As expected while the Australian dollar continued its decline against the Indian Rupee it found its
floor on Thursday. A big boost in the currency due to positive GDP meant Australia closed the week at INR 56.63.
The strong data also resulted in the Australian dollar rising against all major currencies on Friday. We expect this rally to continue as Australia’s economic recovery improves and we have a target of the Australian Dollar rallying up to USD 0.85 by end of the year. We also expect Aussie to continue rally against the Indian Rupee and may go above the Rupees 57 mark next week alone.

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Australian Dollar; Representative Image; Picture Source: @CANVA

Gold had a big see-saw week. Thursday as inflation fears returned the market saw a big sell-off in Gold, its biggest single-day sell-off since February.
However, a weaker than expected Non-farm payroll data on Friday eased concerns that the US Fed would start the taper process. This also resulted in a weaker US dollar which helped Gold recover most of its losses on Friday.

A weak US dollar while should make Gold an attractive investment in the coming weeks any uptake in inflation may quickly roll the prices down.

Australian Gold; Picture Source: @CANVA
Australian Gold; Picture Source: @CANVA

While we are optimistic about Gold recovery, we are also moving very cautiously towards any investments in Gold.

In agricultural commodities, Wheat prices were steady on weak demands across Europe. Ukraine, the largest Wheat manufacturer and exporter in Europe estimated a reduction in export of Wheat from 57 million tonnes in 2019/20 to 45.8 million tonnes in 2020/21 due to a reduction in global demand for Wheat.

Corn prices on the other hand started rising again last week due to high demand in China and
Mexico. We expect Corn to continue its rally and reach new all-time highs in coming weeks on back of continued strong demand from China and Mexico.


Author:
Ateev Dang is a trader and trading coach by profession. He runs his own business called Glow trades Pty Ltd where he teaches anyone who is interested in starting their trading journey how to trade. He can be contacted at [email protected]

Disclaimer:
The writers’ opinion in the above article are their own and do not constitute any financial advice
whatsoever. Nothing published by The Australia Today constitutes an investment recommendation, nor should any data or content publication be relied upon for any investment activities.

We strongly recommend that you perform your own independent research and/or speak with a
a financial advisor or qualified investment professional before making any financial decisions.

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