Technical Analyst, Saxo Bank
Rio Tinto released weaker than expected earnings after Market close Wednesday Sydney time.
Medium term on a weekly chart the share price is in a falling trend.
It has tested the longer term rising trendline a few times the past couple of weeks and if it closes below there is some support at around 87.28. If that support is broken it could fuel a sell-off down to around 70. Weekly RSI is below 40 in a falling trend supporting the bearish outlook.
However, short term the share is treading water – daily chart. Key resistance around 100. RSI is showing negative sentiment but there is divergence i.e., selling pressure has been weakening. However, if RSI closes below its rising trend line lows around 91.91 is likely to be tested and quite possibly taken out.
For this bearish scenario to be reversed a daily close above 100.35 is needed. If that unfolds a move towards strong resistance at around 106 is likely.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.