Asia Day Ahead: Singapore’s inflation ahead, USD/SGD at five-week high

Asia Open

A mixed session in Wall Street last Friday seems to set the Asian session up for a more subdued start into the last trading week of the second quarter. The Nikkei is up +0.24%, ASX -0.23% and Kospi -0.10% at the time of writing, as risk sentiments attempt to balance between continued strength in the US Dollar and weaker oil prices. Sector performance to end last week saw further unwinding in the tech sector, but the mixed performance across the constituents seems to suggest some near-term positioning adjustment as compared to a broad-based reversal.

The Nikkei continues to trade within its consolidation phase, still finding the conviction for a more decisive break of direction in either side. The greater story may revolve around the Japanese Yen, with the USD/JPY coming in close to the 160.20 level, which will keep intervention talks alive once more. It should be apparent by now that intervention impact are short-lived, but it seems to be more of buying some time while waiting for the Federal Reserve (Fed) to kickstart its easing process. The anticipation of any further follow-up moves from the Bank of Japan (BoJ) may likely keep the Nikkei in a more cautious state, paving the way for its broad indecision to drag for longer.

Chinese equities may have been the disappointment over the past month, as mixed economic data once again dampens optimism around China’s recovery picture while stimulus hopes have not found much validation from authorities just yet. From a technical standpoint, this also comes as the Hang Seng Index (HSI) once again proves its weekly Ichimoku Cloud as a key resistance to overcome. The index faltered at the upper edge of its weekly cloud around the 19,700 level last month, which marked the third retest of the key resistance. Overcoming the cloud resistance may be one to watch to support a longer-term reversal to the upside.

Look-ahead: Singapore’s consumer price index (CPI)

Today’s economic calendar will leave Singapore’s CPI data on watch. Headline inflation is expected to tick higher to 3% from previous 2.7%, while the core aspect may edge slightly lower to 3% from previous 3.1%. Since October 2022, the Monetary Authority of Singapore (MAS) has kept policy settings on hold and the mixed inflation front is likely to retain its current wait-and-see stance for inflation to return to target.

USD/SGD pushing to five-week high

Stronger-than-expected US flash Purchasing Managers' Index (PMI) figures have offered some support for the US dollar by allowing room for more patience in the Fed’s policy easing process. That paved the way for the USD/SGD to edge to its five-week high. The formation of higher lows thus far continues to keep an upward bias intact, with the next key resistance at the 1.357 level. The level has weighed on the pair on multiple previous occasions. On the downside, the upward trendline support at the 1.350 level may have to hold, failing which could signal weaker buyers’ strength.