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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Sentiments on hold as Fed meeting looms this week: US SPDR Regional Banking ETF, USD/SGD, Gold

The start of the new trading week could potentially bring about some indecision, before volatility picked up on the onslaught of big tech earnings and the FOMC meeting towards the latter half.

Source: Bloomberg

Market Recap

Wall Street were little changed last Friday amid subdued moves in the Treasury yields, while the US dollar saw further firming (+0.3%) following recent sell-off. Some reservations continue to linger around mega-cap tech stocks ahead of several key earnings this week in the likes of Alphabet, Microsoft and Meta Platforms, as recent releases from Netflix and Tesla suggest that earnings expectations may be priced close to perfection. Overbought technical conditions and ‘extreme greed’ sentiments as shown from the CNN Fear & Greed Index may call for some cooling in the recent equities rally, although the broader trend still leans towards an upward bias.

The start of the new trading week could potentially bring about some indecision, before volatility picked up on the onslaught of big tech earnings and the FOMC meeting towards the latter half, alongside meetings from the European Central Bank (ECB) and the Bank of Japan (BoJ). Up today, a series of global flash purchasing managers index (PMI) data will be on watch, with consensus largely for global economic conditions to stay soft.

With the pick-up in the US financial sector lately on earnings releases (XLF +3.1% over past week), perhaps one to watch may be the SPDR S&P Regional Banking ETF, which has recently broken above the neckline of an inverse head-and-shoulder formation. The neckline projection suggests an eventual target of the 56.10 level, with immediate resistance to overcome at the 46.94 level for now. Increasing moving average convergence/divergence (MACD) and a move above its 100-day moving average (MA) seem to support some upward momentum in place.

Source: IG charts

Asia Open

Asian stocks look set for a positive open, with Nikkei +1.32%, ASX+0.04% and KOSPI +0.27% at the time of writing. Chinese equities were attempting to find their footing last Friday, with the Nasdaq Golden Dragon China Index eking out a 0.4% gain, following a 0.8% up-move in the Hang Seng Index in the earlier session. Recent stimulus measures to boost consumption of automobile and electronics items failed to provide much conviction that they will be sufficient to uplift the downbeat growth conditions, with mounting hopes on the China Politburo meeting this week for more follow-through.

Closer to home, Singapore’s consumer price index (CPI) will be on the radar today, with further moderation in pricing pressures likely to be the story. Headline inflation is expected to ease to 4.6% from previous 5.1%, while the core aspect is expected to head to 4.2% from the previous 4.7%, overall reflecting some progress in inflation and provide room for an extended pause in tightening from the Monetary Authority of Singapore (MAS).

The USD/SGD has been largely trading within a rectangle pattern since the start of the year, recently attempting to find support off the lower base at the 1.320 level. A bullish crossover on MACD and increasing RSI may point to near-term upward momentum as a reversion from oversold technical conditions plays out, but the broader consolidation pattern could still point towards wider indecision. Near-term, any softer-than-expected read in inflation figure could potentially leave the 1.338 level on watch as immediate resistance to overcome.

Source: IG charts

On the watchlist: Gold prices on watch in lead-up to FOMC meeting this week

Into the FOMC meeting this week, expectations were priced for the Fed to deliver its last 25 basis point (bp) rate hike before a prolonged pause in its hiking cycle through the rest of the year. Any emphasis on a more data-dependent stance from the Fed at the upcoming meeting could be viewed as less hawkish, which may aid to limit the downside for gold prices. Thus far, gold prices have recovered as much as 4.5% in July on a softer US dollar and lower Treasury yields, but are facing some resistance at the US$1,980 level.

The recent CFTC data has revealed a sharp build-up in net-long positions among money managers to its two-month high last week (135,907 contracts, up from 100,619 contracts the week before). For now, its weekly Relative Strength Index (RSI) has also managed to defend its key 50 level. Greater conviction for buyers may have to come from a reclaim of its key psychological US$2,000 level, with any successful attempt potentially placing its 2023 high back on the radar for a retest.

Friday: DJIA +0.01%; S&P 500 +0.03%; Nasdaq -0.22%, DAX -0.17%, FTSE +0.23%


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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