Asia Day Ahead: Higher Treasury yields weigh, AUD/USD lower while EUR/USD hovers at support

Market Recap

Risk sentiments continue to reel in from the fresh multi-year highs in US Treasury yields yesterday, as resilient US economic data brought the high-for-longer rate outlook for the Federal Reserve (Fed) back into the limelight lately. Some after-effects of the blowout US retail sales report this week may remain in play, while lukewarm US housing data overnight did not change much of the hawkish narrative. The US 10-year yields seem to be setting its sight on the key 5% level, surging close to 20 basis-points (bp) over the past two days to stand at 4.91%.

After-market result releases from Netflix and Tesla may offer investors some diversion. A higher-than-expected addition of 8.76 million global subscribers during the quarter once again pushed back against any lingering views that Netflix's membership growth momentum may be slowing, while a price hike announced by the company may be a net-positive for its subsequent top and bottom-line, given its resilient user base. Its share price is up 13% after-market.

The same optimism is not displayed in Tesla however, which failed to beat both revenue and earnings expectations. A more cautious outlook in the earnings call, along with some pushback in the financial contribution for Cybertruck, seems to take the bulk of the attention. Not to mention its slowest revenue growth in more than three years and a significant softening in operating margin (7.6% vs 17.2% a year ago).

A trendline breakdown with a 4.3% decline in its share price after-market may offer a huge obstacle for the bulls, while its daily moving average convergence/divergence (MACD) seems to be setting its sight on a reversion into negative territory as a sign of downward momentum. Any follow-through selling in tonight’s session may leave the US$210.12 level on watch next as potential support.

Asia Open

Asian stocks look set for a negative open, with Nikkei -1.55%, ASX -1.14% and KOSPI -1.24% at the time of writing. Another surge in Treasury yields, lingering geopolitical tensions in the Middle East and higher oil prices seem to dampen appetite in risk-taking for now. Despite some promising signs of policy success seeping into China’s economic data yesterday, Chinese equities failed to move higher with the Hang Seng heading back towards its early-October low. Unresolved risks in the property sector may have some part to play, as concerns revolve around a potential default for troubled Chinese developer Country Garden.

Aside, the economic calendar this morning brought fresh update on Australia’s employment numbers, which rose significantly less than expected (6,700 vs 20,000 expected), but unemployment rate saw a tick lower (3.6% vs 3.7% forecast) as an indication of a tight labour supply. Reaction in theAUD/USD is to the downside, with intermittent bounces lately failing to find much of follow-through. With its daily Relative Strength Index (RSI) struggling to cross above the key 50 level since July this year, sellers seems to retain control for now, with any fresh break below recent lows potentially leaving its October 2022 low on watch next at the 0.617 level.

On the watchlist: EUR/USD attempting to defend key support but much awaits

The EUR/USD has been attempting to hold above a key horizontal support at the 1.051 level lately, with its MACD forming a rounding bottom as an attempt to stabilise from its 7% sell-off since mid-July. A brief breakdown of the support line in early-October was met with some defending from buyers for now, but greater conviction may have to come from a move above its recent October high at the 1.063 level to form a near-term higher high. That may pave the way to retest the 1.081 level next.

One may also watch for a move in its daily RSI back above the 50 level, which it has not done so since July this year. Any failure to defend the 1.051 level could unlock fresh selling pressures potentially towards the 1.028 level, where the next line of support resides.

Wednesday: DJIA -0.98%; S&P 500 -1.34%; Nasdaq -1.62%, DAX -1.03%, FTSE -1.14%