Markets to watch: markets await central bank cues as Wall Street tech rallies

Tech stocks lift Wall Street amid mixed market sentiment

Global markets started the new trading week on a softer footing, as strength in Wall Street to end last week was concentrated around heavyweight tech stocks while value sectors largely lagged. Market participants continue to look forward to a 25 basis point (bp) rate cut from the Federal Reserve (Fed) next week, receiving somewhat of a go-ahead from the recent US jobs report.

US jobs report signals soft landing potential

Stronger wage growth and a surprise upside in US job addition should support a healthy consumer backdrop and a potential soft-landing scenario, while an inch higher in unemployment rate (4.2%) towards the Fed’s year-end unemployment projection of 4.4% may give US policymakers the reassurances to follow through with their rate-cut guidance in December.

Geopolitical tensions remain contained

Political turmoil continues to be side-eyed as well, particularly in Syria and South Korea, but the potential risks of a wider spillover to other parts of their respective regions seems low for now.

Central banks and US CPI take center stage

Ahead, attention will revolve around a series of central bank meetings this week (Reserve Bank of Australia (RBA), Bank of Canada (BoC), European Central Bank (ECB), Swiss National Bank (SNB), while the US consumer price index (CPI) should grab some market focus in anchoring rate bets as well. Any upside inflation surprise could determine if we will get more of a “hawkish cut” from the Fed next week, when they guided for the rate outlook into 2025.

Asset performance weekly chart

US dollar index: buyers attempting to hold trendline support

The US dollar initially dipped on recent US jobs data but eventually found support as buyers defended the key 105.13 trendline level. Its daily relative strength index (RSI) has reset to its midline, easing prior overbought conditions and providing buyers with an opportunity to reload long positions.

Key technical levels under scrutiny

Holding above the 105.13 level is crucial. A breakdown below this point could validate a minor head-and-shoulders pattern, potentially targeting the 103.81 level next. While this week’s CPI data may not significantly alter expectations for a 25 bp Federal Reserve rate cut, it could signal the need for a "hawkish cut" from policymakers, potentially lending further support to the US dollar.

Key levels:

• R2: 107.80
• R1: 105.91
• S1: 105.13
• S2: 103.81

USD daily chart

EUR/USD: inverse head-and-shoulders neckline break falters

EUR/USD failed to break above the minor inverse head-and-shoulders (HNS) neckline at the 1.061 level, with a long-tailed rejection candle highlighting strong selling pressure. The pair's daily relative strength index (RSI) turning lower from its midline reinforces the broader downward bias, suggesting limited appetite for sustained upside momentum.

ECB meeting heightens risks for EUR/USD

This week’s ECB meeting could introduce further risks for EUR/USD. A 25 pb rate cut is fully priced in, but weak eurozone purchasing managers’ index (PMI) data may amplify concerns about economic contraction. This could prompt policymakers to adopt a more dovish tone, potentially paving the way for back-to-back rate cuts in the months ahead.

Key levels:

• R2: 1.074
• R1: 1.061
• S1: 1.045
• S2: 1.033

EUR/USD daily chart

Japan 225 index: symmetrical wedge formation in place

The The Japan 225 index has been consolidating within a symmetrical wedge pattern over recent months, recently rebounding off daily Ichimoku Cloud support near the 37,645 level. Upside momentum appears to be building, as the daily Moving Average Convergence Divergence (MACD) shifts into positive territory, signalling potential for further gains.

Strengthening yen and economic resilience

A strengthening yen over the past month may ease pressure on policymakers to consider a rate hike in December. Recent gross domestic product (GDP) updates also highlight a more robust economy, offering additional support for the index.

Buyers await a decisive breakout

For buyer confidence to strengthen, a decisive breakout above the symmetrical wedge and a move past the December 2024 high will likely be required. Such a move could signal a more bullish trajectory for the Japan 225 Index.

Key levels:

• R2: 40,000
• R1: 39,200
• S1: 38,400
• S2: 37,645

Japan 225 daily chart

New York Sugar No. 11: Channel breakout remains on watch

After a robust rally in September, sugar prices have retraced nearly 15%, forming a downward channel that may resemble a flag formation. Key support is identified at the 20.66 cents per pound level, where the 200-day moving average (MA), daily Ichimoku Cloud, and a significant Fibonacci retracement converge. Traders may look for a breakout above the channel and a daily RSI move above its midline to gain confidence in initiating long positions.

Key levels:

• R2: 22.42
• R1: 21.35
• S1: 20.66
• S2: 20.00

New York Sugar No. 11 daily chart:

Singapore Blue Chip Index: Room for slight cool-off at upper channel?

The Singapore Blue Chip index has rallied an impressive 30% since August, reaching a multi-year high. However, its advance within a rising channel pattern recently hit resistance at the upper trendline. A bearish divergence on the daily RSI indicates a potential slowdown in upward momentum. Traders may watch for the RSI to retreat toward its midline, which could provide a much-needed technical reset and pave the way for another potential leg higher.

Key levels:

• R2: 394.96
• R1: 382.84
• S1: 376.33
• S2: 360.40

SGBC daily chart