Asia morning update - At inflection point

As told in our week ahead, a relatively busier week stretches ahead this week, with events ranging from the all-important US-China talks in Beijing to a flurry of data decorating the economic calendar. Most notably, talks between high-ranking officials from US and China have now been cast in stone for February 14-15 according to White House officials. With approximately two weeks to go before the deadline, any decisive conclusions from the talks will again find the far-reaching ripple effect across markets. Meanwhile, markets will unfortunately not be spared from political noises as well with talks over the US border wall funding breaking down over the weekend and lifting the odds of a government shutdown resumption into the end of the week. For markets, after the worst December and best January in years, it appears that we are back at inflection point across various asset classes, waiting for direction yet again.

A mixed start is expected for Asia markets despite the late attempt at gains seen on Wall Street on Friday. The themes of trade and growth concerns across the globe continue to permeate sentiment, one to weigh on markets. Notably, China returns after the Chinese New Year holiday week, one to catch up to the disappointment over diminishing odds of a deal prior to the March 1 US-China negotiation deadline. Watch the drag this would likely have across the region amid a day filled with mostly tier-2 releases, UK GDP nevertheless one to watch.

Levels check

US Dollar Basket: The greenback had been one clouded in many ways by various factors ranging political, economic and monetary policy. That being said, we have certainly seen the US dollar index keeping to the uptrend through staging a rebound in recent sessions.

While the likes of the US government shutdown uncertainty, a broad slowdown in economic indicators and Fed’s dovishness served as the bane for greenback strength, the surge had instead been driven by a search for safety. US treasuries’ driven demand for the greenback served as the engine powering the US dollar of late. The return of the CFTC commitment of traders’ report had also reflected the increased bullishness from large speculators. Expect prices to stay supported with the resistance up at the 97.0 figure.

EUR/USD: The euro and the pound may be counted as the weaker ones among the lot for major currencies moving into this week. This follows in the foot of growth revisions from the European Union and the Bank of England alike, while some of the poorer economic data showings last week from the likes of Germany also backing these concerns.

It is no question, however, that the $1.1307 support remains a strong one in keeping prices in the rangebound trade. That said, the risks are tilted to the downside as we continue to watch for a break here. A slew of data releases in the week including Q4 GDP for German and the eurozone could pale in comparison to US releases, providing trigger.

S&P 500 Index: The S&P 500 index oscillated at its 61.8% Fibonacci retracement level in the previous week, breaking from January’s uptrend as momentum wanes on the abovementioned trade and growth uncertainty. Watch the US-China trade negotiation among others while the earnings season churns on. The directionless trade at present would count of these factors for guidance into the week.

As with the S&P 500 index, Asian indices including the likes of the Hong Kong Hang Seng Index and the STRAITS have been seeing the flatlining trade continue. Bearish divergence notably can be seen on the STI with the MACD heading south, one to watch for pressure on the downside in the consolidation.

Gold: The safe haven trade is an apparent theme here with gold prices on the climb despite the greenback strengthening. The uptrend can also be seen kept rather intact at present with the watch on for the geopolitical factors and growth momentum this week for direction.

Crude oil: Both Brent and WTI futures can be seen continuing to play by the themes of global economic expansion as the European triggered growth woes and US-China trade uncertainty from last week dented prices. This saw Brent trading to the lower end of the consolidation zone. Both the abovementioned items will make a comeback this week, ones to keep us attuned. Support comes in close at around the $60 mark.

Friday: S&P 500 +0.07%; DJIA -0.25%; DAX -1.05%; FTSE -0.32%