Markets to watch this week

Series of central bank meetings, US CPI on watch this week

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.

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.

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. 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.

US Dollar Index: Buyers attempting to hold trendline support

The US dollar initially dipped on recent US job 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 offering buyers a chance to reload on longs. Holding above the 105.13 level will be crucial; a breakdown could confirm a minor head-and-shoulders pattern, targeting the 103.81 level next. While this week’s CPI may not shift expectations for a 25 bp Fed cut significantly, it could call for a "hawkish cut" from policymakers, potentially supporting the dollar.

Levels:

R2: 107.80
R1: 105.91

S1: 105.13
S2: 103.81

US Dollar Index chart:

EUR/USD: Inverse HNS neckline break failed to materialise

EUR/USD failed to break above the minor inverse head-and-shoulder (HNS) neckline at the 1.061 level, with a long-tailed rejection candle signalling strong selling pressure. Its daily RSI turning lower from its midline reinforces the broader downward bias. This week’s ECB meeting may pose risks for the EUR/USD, as a 25 bp rate cut is fully priced in, while weak Eurozone Purchasing Managers' Index (PMI) data may underscore growing concerns about economic contraction and call for policymakers to lean dovish with back-to-back rate cuts ahead.

Levels:

R2: 1.074
R1: 1.061

S1: 1.045
S2: 1.033

EUR/USD chart:

Japan 225 Index: Symmetrical wedge formation in place

The Japan 225 Index has been consolidating within a symmetrical wedge pattern in recent months, recently rebounding off its daily Ichimoku Cloud support near the 37,645 level. Upside momentum appears to be mounting, as the daily Moving Average Convergence Divergence (MACD) shifts into positive territory. A strengthening yen over the past month may alleviate pressure on policymakers to consider a rate hike in December, while recent gross domestic product (GDP) updates highlight a more robust economy. However, a decisive breakout above the wedge and surpassing the December 2024 high would likely be needed to bolster buyer confidence further.

Levels:

R2: 40,000
R1: 39,200

S1: 38,400
S2: 37,645

Japan 225 Index chart:

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

After a strong September rally, sugar prices have retraced nearly 15%, drifting within a downward channel that could resemble a flag formation. Key support lies at the 20.66 level, where the 200-day moving average (MA), daily Ichimoku Cloud, and a critical Fibonacci retracement converge. Buyers may await a breakout above the channel and a daily RSI move above its midline for greater confidence in loading up longs.

Levels:

R2: 22.42
R1: 21.35

S1: 20.66
S2: 20.00

New York Sugar No. 11 chart:

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

The Singapore Blue Chip Index has surged 30% since August, reaching a multi-year high. However, its climb within a rising channel pattern recently encountered resistance at the upper trendline. A bearish divergence on the daily RSI signals waning upward momentum for now. Traders may look for the RSI to retreat toward its mid-line, which could provide a technical reset and set the stage for another potential leg higher.

Levels:

R2: 394.96
R1: 382.84

S1: 376.33
S2: 360.40

Singapore Blue Chip chart: