Asia Day Ahead: Silver prices defend key support, dip-buying pushed STI to one-month high

Market Recap

Wall Street gained further ground overnight to reverse all of its post-US consumer price index (CPI) dip, as strength in the energy sector helped to offset the mixed performance in tech. Notably, Apple managed to defend its 200-day moving average (MA) overnight, following its fourth retest of the key trendline since the start of the year. Tesla was also up 6.2%, revealing some near-term catch-up after falling behind the rest of the Magnificent Seven in terms of year-to-date performance.

The US retail sales data release was the economic highlight, with the sharp extent of slowdown in consumer spending reflecting higher economic risks and support the thesis for earlier rate cuts. US retail sales contracted 0.8% month-on-month in January, far greater than the 0.1% contraction expected. Along with the surprise contraction in US industrial production data as well (-0.1% versus 0.3% forecast), that may explain the small declines in US Treasury yields to end the day, with the US two-year yields hanging just below its 4.60% level.

The outperforming sector overnight is the Energy Select Sector SPDR Fund, which saw a move to its five-week high. The sector has managed to head above a near-term downward trendline and its Ichimoku cloud resistance for the first time since October 2023. Its daily relative strength index (RSI) has managed to defend its key 50 level for now. Buyers may set their sight to retest its year-to-date high at the US$87.00 level, with any successful move above it potentially leaving the US$90.00 level on watch next.

Asia Open

Asian stocks look set for a positive open, with Nikkei +1.32%, ASX +0.47% and KOSPI +0.65% at the time of writing. Sentiments broadly overcame the post-US inflation jitters, finding comfort from a dip in the US dollar and slightly weaker Treasury yields. The Nikkei continues to extend its gains, standing just less than 2% away from its 1989 peak. The Hang Seng Index (HSI) has managed to stabilise lately as well, although more still needs to be seen to indicate any trend reversal.

Economic data this morning saw a move lower in South Korea’s unemployment rate to 3%, following its jump to 3.3% in December. This suggests ongoing tight labour conditions, which may provide room for more patience in terms of rate cut timings from the Bank of Korea (BoK). Current market pricing are only looking for rate cut from the BoK in 4Q 2023, which is validated with today’s data.

We also have a surprise upside in Singapore’s non-oil domestic exports (NODX), with its 16.8% expansion from a year ago crushing expectations (5.4% forecast). This seems to challenge the slower growth pace reflected in the 4Q gross domestic product (GDP) figure yesterday, and eyes will be on whether the recent bounce in NODX can be maintained over coming months to validate a stronger recovery in 2024.

The Straits Times Index (STI) has managed to see some dip-buying this week, rebounding by more than 3% since Wednesday to reclaim its 200-day MA in today’s session. On the wider scale, the index still trades within a broad range, with any near-term upside to leave a retest of the 3,230 level on watch. Immediate support may remain at its 200-day MA, followed by the 3,145 level where aggressive dip-buying defended the level this week.

On the watchlist: Silver prices attempting to defend horizontal support

Silver prices have managed to defend its key horizontal support at the US$22.20 level thus far, tapping on a weaker US dollar overnight (-0.4%) and a retracement in Treasury yields as relief catalysts, following its post US-CPI dip. Near-term, its 100-day MA at the US$23.34 level will be on watch as immediate resistance to overcome, where the trendline has limited price gains since the start of the year. A move above the level may pave the way to retest the US$24.50 mark next. On the downside, any failure for the key horizontal support at the US$22.20 level to hold may unlock fresh selling pressures, potentially towards its October 2023 low at the US$20.75 level.

Thursday: DJIA +0.91%; S&P 500 +0.58%; Nasdaq +0.30%, DAX +0.60%, FTSE +0.38%