27 September 2021 22:34

Market Mantra: How to ride the bullish wave of Australian shares and Cryptocurrencies

Treasurer Josh Frydenberg has warned of another recession's risk in Australia if NSW does not get on top of the latest outbreak.

Australian investors closed the week marginally lower after technology and energy stocks declined. Origin energy dropped as much as 7% on Friday alone after warning of a steep fall in earnings over the next two financial years.

However, the index gained more than 1% in July, thus recording its 10th straight monthly advance, a winning streak not seen since 2007. Even a continuous rise in COVID cases in Australia did little to dent steady gains in Australian share as investors were buoyed by strong earnings in the US. The monthly gains exhibit a good track record for the Australian market.

The tech and energy stocks however soured the mood on Friday with Afterpay and Origin leading the charge. Origin Energy saw its worst in over a year after it flagged a $2.2 billion hit due to the rapid influx of renewables.

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Even though Treasurer Josh Frydenberg has warned of another recession’s risk in Australia, NSW does not get on top of the latest outbreak. This lead to a muddied week for Australian stocks, however a blowout quarter in the US compared to a year ago helped control the losses as traders continued to find positives in the market.

A tighter lockdown in Sydney due to an increase in cases and relentless rise in infections in Australia’s most populous state will however be the focus as Australia enters its earnings season. It will be interesting to see if the COVID lockdowns will overshadow the recent profit surge rally.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

With Australia about to enter the end of the financial year reporting period, the focus in local markets will mainly be on lockdowns across the nation and rising COVID19 cases in NSW. The situation in NSW is setting Australia for a prolonged lockdown which is expected to move the Australian economy into negative growth in the coming quarter. With economists warning Australia can enter its second recession in as many years, the lockdown numbers will impact the mood in Australia.

A bumper dividend and earnings season however is expected to keep Australian markets continue with their gains. NAB has given investors enough reasons to believe bumper dividends are in store next month after it chose to buy back 2.5 billion dollars in shares. A similar move was also announced by ANZ earlier in July. According to leading banking analyst Brett Le Mesurier there may be a $30 billion bank buyback bonanza in store for investors.

Gold prices continued to rise last week in hopes that bullion would be a good hedge against inflation. US Federal Reserve has continued to buy bonds in large volumes for an economy overcoming pandemic troubles. Australian Reserve Bank has done similarly.

As such, there is a risk in the market when all this stimulus will be taken away? It might not happen anytime soon given the pandemic troubles that remain, however it does make gold an important asset to cover the risk of inflation.

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Market-Mantra-Bitcoin; Picture Source: @CANVA
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Gold hit a two-week peak on Thursday after US Fed reassured that a rate hike in the US was not on the cards for the time being. The rally was dented a bit by some profit-taking on Friday, however, lower government bond yields continue to decrease the opportunity cost of holding gold, which pays no dividend, hence making it an attractive investment.  

Oil prices kept their march higher as investors continue to bet that vaccinations would alleviate the impact of a resurgence of COVID infections across the globe and keep oil demand growing faster than supply.

An increase in daily gasoline consumption in India exceeding pre-pandemic levels in July also boosted oil prices. Rising fuel sales in India, the world’s second-biggest consumer and importer of oil is a positive development for global oil markets.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

Even though the Industrial oil consumption was below the consumption around the same period in 2019 in India, an easing of restrictions by some states saw motorists flocking to tourist destinations and markets to boost oil consumption. This also resulted in Indian Prime Minister Narendra Modi warning against overcrowding.

The Australian dollar declined for the fifth week in a row against the US Dollar as rising Coronavirus cases continue to weaken the Australian economy.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

Even though the US Dollar remained weak against other currencies following the Fed’s announcement Australian Dollar could not benefit due to the precarious economic situation caused by growing Delta strain cases in Australia.

The year 2020 was not a particularly bad year for the Australian economy as compared to the rest of the world as Australia closed its borders quickly and avoided the pandemic. Nevertheless, the virus has managed to enter the country again and currently the daily cases of COVID exceed 200 in NSW.

A low immunisation of Australian people means that the regional blockades need to continue, which seriously affects the economy and, in turn, the Australian dollar’s price.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

It is no surprise as such that the Australian Dollar is in a downtrend. Against the Greenback the price level develops below the 20- day moving average while the technical indicators remain at negative levels.

With both the weekly and monthly moving averages maintaining their strong bearish momentum the prices may continue to decline further. The Australian dollar is expected to close near 0.7335 next week with traders aiming at support levels around 0.7290 and 0.7220.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

In comparison to Indian currency, the Australian Dollar rose 30% since the start of the pandemic in March 2020, which was welcome news for Indian ex-pat workers in Australia. By April 2021 Australian Dollar was above INR 58.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

However, since the start of the Delta outbreak in Australia the Rupee has steadily recovered against the Australian Dollar. AUD/INR is now well below its 90-day average below 55 Rupee to the Dollar.

The Indian Rupee, however, continue to remain under pressure from the US Dollar amid COVID 19 woes in India, which could be cited as the key catalyst. In a wake-up call for the policymakers, India continues to record more than 40,000 daily cases and 500 plus virus-related deaths.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

In the world of Cryptocurrencies, Bitcoin is gearing up for a comeback which according to analysts could lead to a repeat of the classic bull run it showcased in 2013 and 2017.

Bitcoin has been trying to repair the rout led by China’s mining ban in mid-May. The last week gains in Cryptocurrencies, however, were stronger than most anticipated.

Last week BTC prices gained a total of 23% at the time of writing this article. It was a reaction similar to 2013 when following a troubling three months of news and price action, Bitcoin rebounded to record 5 green monthly green candles in a row to rise 10x times during the second half of 2013.

Investor behaviour further mimics the change in sentiment. Strong holders with little or no history of selling their BTC are back in control at levels never seen before and absent since Bitcoin’s current all-time high of USD 54,500 in April.

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Market-Mantra-Bitcoin; Picture Source: @CANVA

The best games last week however were reserved for Ethereum, with traders now eyeing $3,000 per Ether token.

Having said that many traders are feeling increasingly nervous due to the Bipartisan Legislative Bill that is currently making its way through the US Legislature and includes a provision to raise $28 Billion in taxes from crypto investors, a move which many believe could kill the crypto market.

In agricultural products weather corn and soybean slipped in prices, pressured by extended forecasts announcing cooler weather in August. Even though the conditions in the US remain hot and dry an indication of a change in the next 11 to 14 days improved the likelihood of increased supply.

In regards to wheat, dry weather has continued to impact Russia, World’s largest wheat exporter. However, a reduction in wheat supply still could not boost the wheat price as livestock producers considered ration changes from wheat to corn.

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 [email protected].

Disclaimer:

The writers’ opinions 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 financial advisor or qualified investment professional before making any financial decisions.

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