Asia Day Ahead: MAS kept policy settings unchanged, USD/SGD on ascending wedge pattern

Asia Open

The Asian session was met with a mixed open, with Nikkei +0.22%, ASX -0.32% and KOSPI -0.23% at the time of writing. Another round of upside in US Treasury yields and a firmer US dollar continue to keep risk sentiments across the region in check, although a strong turnaround in Apple (+4.3%) and Nvidia (+4.1%) overnight did offer a spark of optimism for Wall Street. Gains in all “Magnificent Seven” stocks aided to put the Nasdaq strongly in the green (+1.68%), with renewed strength in big tech potentially offering a catalyst for rate jitters to settle.

Upside surprises in the US Producer Price Index (PPI) continue to push back against earlier rate cuts, but with markets having adjusted their expectations to price for a September rate cut instead of June, we could start to see some shrugging off to high-for-longer rate chatters. One may recall how markets were pricing for six rate cuts at the start of the year, but has since recalibrated their expectations with just short-lived retracement in the equity markets along the way.

Greater focus will now be turned to the upcoming earnings season, with recent run in stronger-than-expected US economic data likely to fuel more soft-landing talks while paving the way for earnings recovery momentum to continue.

Economic data to digest: Singapore’s monetary policy decision, 1Q GDP

This morning saw the Monetary Authority of Singapore (MAS) keeping its monetary policy settings unchanged for the fourth straight meeting as widely expected. The central bank maintained its inflation projections, sticking to their guidance for core inflation to “decline gradually and step down by 4Q, before falling further next year”, which explains their current wait-and-see. Lower-than-expected 1Q gross domestic product (GDP) does raise the odds for policy easing into the second half of this year, with eyes potentially on the Federal Reserve (Fed) to make the first move. The advance estimate for Singapore’s 1Q growth rate came in below-forecast at 2.7% versus the 3.0% consensus. Month-on-month, growth was up 0.1%, which is its lowest growth in a year.

What to watch: USD/SGD on an ascending wedge pattern

The USD/SGD has been trading within an ascending wedge pattern since the start of the year, with the formation of higher highs and higher lows keeping the upward bias intact for now. Its daily relative strength index (RSI) has also successfully defended its key 50 level this week, which suggests buyers in control, while the pair trades firmly above its daily Ichimoku Cloud and various moving averages (MA). Ahead, the pair may attempt to edge higher to retest the 1.360 level, while on the downside, the 1.345 level may serve as potential support, where the low of the post-US consumer price index (CPI) surge will be on watch.