Quiet start to shortened trading week: Nasdaq 100, China A50, NZD/USD

Market Recap

Major US indices ended last week on a mixed tone, as the stream of US economic data has not been supportive of any easing in rate hikes from the Federal Reserve (Fed) thus far. Higher-than-expected inflation readings, coupled with a robust retail sales figure, have led market participants to revisit their rate expectations, with growing bets that three more 25 basis-point (bp) hikes will be warranted. More Fed members have also jumped in to call for higher rates, although it will likely take further strength in upcoming data to anchor their views before the next Fed meeting (21-22 March 2023). Renewed gains in US Treasury yields for the week has lifted the US dollar higher, although upside has taken a slight breather last Friday. That allowed gold prices to stabilise after recent sell-off. In the meantime, sector performance continued to reveal a cautious risk environment, with outperformance concentrated in defensive sectors to end last week.

The upcoming week will be a shortened one, with US markets closed today, potentially leaving a quiet session to start the new week. For the Nasdaq 100 index, it continues to hang above its key 12,200 level of support. Improving market breath in the index thus far may still provide some sustainability to the recent rally, but the 12,200 level may have to see some holding up. Resistance ahead will be at the 12,900-13,000 region, where a Fibonacci confluence zone resides.

Asia Open

Asian stocks look set for a negative open, with Nikkei -0.34%, ASX -0.20% and KOSPI -0.74% at the time of writing. Some gains in the US dollar this morning continue to leave risk sentiments in check, along with US equity futures heading slightly into the red thus far. China may be set to release its decision on its 1-year and 5-year prime loan rates today, although a recovering economy may leave some wait-and-see with a no-change in rates for now. On another note, US-China relations continue to see some tough exchanges, with the meeting between Antony Blinken and Wang Yi suggesting that tensions could drag for longer.

Ever since the China A50 index has broken below its rising channel pattern, the formation of a new lower high and lower low provides a near-term downward bias. The 200-day moving average (MA) is being tested at the moment, which coincides with a longer-term downward trendline support on the weekly timeframe. Failure to defend the key MA line could potentially pave the way towards the 12,650 level next, where a 38.2% Fibonacci retracement level stands.

On the watchlist: NZD/USD on near-term double-top formation ahead of RBNZ meeting this week

After an 18% surge since October 2022, upside in the NZD/USD has stalled into a near-term double-top formation, as the US dollar saw renewed gains while economic data thus far has been supportive of an eventual downshift in rate hikes from the Reserve Bank of New Zealand (RBNZ). Heading into the upcoming RBNZ meeting, a 50 bp hike remains the strong consensus (89% probability), but market pricing is also leaning towards a downshift to 25 bp hikes thereafter. The possibility of a dovish takeaway remains on the table. The pair is currently retesting the neckline at the 0.622 level, where a 61.8% Fibonacci retracement level resides. Lower highs have been presented on moving average convergence/divergence (MACD), which indicates moderating upward momentum. The projection of the double-top pattern could potentially leave the 0.593 level on watch in the event of any breakdown of the 0.622 level.

Friday: DJIA +0.39%; S&P 500 -0.28%; Nasdaq -0.58%, DAX -0.33%, FTSE -0.10%