Greater market moves to be presented ahead: US dollar, Straits Times Index, Gold

Market Recap

The quiet economic calendar to start the week provided little catalyst to spur a wider move in Wall Street yet, keeping the indices in its subdued ranging pattern overnight (DJIA +0.20%; S&P 500 +0.09%; Nasdaq -0.29%). Today could see a picking up of the pace however, with US house price data and consumer confidence survey lined up ahead, followed by Alphabet and Microsoft’s earnings after-market.

The only notable data for sentiments to digest overnight may be the sharp underperformance in the Dallas Fed Manufacturing Index (-23.4 versus -14.6 forecast), which puts recession fears back into the spotlight following last Friday’s promising flash Purchasing Manager’s Index (PMI) data. The reading at its lowest level since May 2020 seems to provide some cues that a recovery in the US manufacturing sector is still far from sight. To recall, the US ISM manufacturing PMI data has been in contractionary territory for five consecutive months, with the regional survey suggesting that further contraction may be expected.

The lacklustre showing in the data saw Treasury yields head lower, translating to a decline in the US dollar as well. Having traded on a descending triangle over the past week (four-hour chart), yesterday’s sell-off saw a breakdown of its base, which seems to leave the 2023 low at the 100.50 level on watch next. Failure for the 100.50 level to hold subsequently could pave the way towards the 99.00 level. The latest Commodity Futures Trading Commission (CFTC) data revealed further build-up in net-short positioning in the US dollar aggregate positioning with other G10 currencies, with net-short positioning among large speculators at its one-month high.

Asia Open

Asian stocks look set for a slight positive open, with Nikkei +0.34% and KOSPI +0.17% at the time of writing. Australia is closed for a market holiday (Anzac Day). Overnight, the Nasdaq Golden Dragon China Index has declined 2.4%, reflecting a heavier de-risking in Chinese equities than its US counterparts. As reopening optimism fizzles, a breach of the 200-day moving average (MA) for the CSI 300 index may aggravate the sell-off as well.

On another front, the SGX fund flow data has revealed its first week of net institutional inflows last week, putting an end to two months of consecutive outflows. This comes as the index is retesting its early-April high, but a flat-lining moving average convergence/divergence (MACD) and Relative Strength Index (RSI) seems to point to a lack of momentum for now. Any successful move above the April high could support further upside to the 3,376 level, with a key catalyst to revolve around upcoming banks’ results.

On the watchlist: Gold prices defending its lower channel trendline for now

The pullback in Treasury yields has been supportive of gold prices overnight, allowing the non-yielding yellow metal to defend the lower trendline support of a channel pattern for now. That said, the recovery has been met with relatively lower volume while continued declines in both MACD and RSI point to easing upward momentum, hence still providing a mixed view overall.

A break below the channel will remain on watch for the bears, to provide greater conviction of a wider retracement to the US$1,895 level. For the bulls, overcoming the key psychological US$2,000 once more will be looked upon as a claim of victory.

Monday: DJIA +0.20%; S&P 500 +0.09%; Nasdaq -0.29%, DAX -0.11%, FTSE -0.02%