Market Recap

It was another day in the red for US indices overnight (DJIA -0.86%; S&P 500 -0.72%; Nasdaq -0.49%), but the lesser extent of sell-off compared to days before and after-market results beat from Apple could drive some attempts to stabilise for now.

Still, the confidence in the US banking space remains unrestored, with the SPDR S&P Regional Banking ETF down another 5.5% yesterday. As we head into the weekend, focus will be on how authorities could move to address the issue (in the likes of the Silicon Valley Bank’s fallout in March) to limit further contagion risks. Any inaction over the weekend could translate to a more downbeat risk environment to start next week.

The silver lining after-market comes from Apple, with better-than-expected iPhone sales showing a sign of resilience amid the broader decline in global smartphone shipments in quarter one (Q1) 2023. Above estimate gross margins, a 4.3% dividend raise and continued authorisation of a $90 billion share repurchase program from a year ago may provide some conviction that its business may hold up better than expected ahead, despite weaker economic conditions. Its share price is up 2.5% after-market.

Elsewhere, the European Central Bank (ECB) has delivered a 25 basis-point hike yesterday, bringing its main policy interest rates to 3.25%. A hawkish stance at the press conference suggests more hikes ahead but given the moderation in economic data lately (decline in economic surprise index), markets are leaning towards two more 25 basis-point hikes at best.

The EUR/USD continues to hang at its key resistance at the 1.104 level, with a consolidation at resistance suggesting a strong showing from the bulls thus far in absorbing the selling pressure. Any break above the 1.104 level may be on watch to pave the way towards the 1.121 level next. On the downside, a series of support will be in focus to potentially deliver a higher low, including an upward trendline support and its 100-day moving average (MA) line.

Asia Open

Asian stocks look set for a muted open, with ASX +0.07% and NZX -0.48% at the time of writing (8.30am SGT). Japan and South Korea markets are closed for holiday. Aside, the Hang Seng Index managed to deliver a 1.3% gain yesterday after coming close to its key 200-day MA.

Focus on the economic calendar will be on the Reserve Bank of Australia (RBA) statement on monetary policy. A recent 25 basis-point hike from the central bank threw many market participants off guard, which will be eager to seek for more clarity on that decision from the statement. Indonesia’s Q1 GDP growth rate will take some focus as well (10am SGT), and closer to home, Singapore’s retail sales will be released at 1pm SGT.

Aside, the AUD/NZD is back to retest its 2023 low at the 1.062 level as moving average convergence/divergence (MACD) crossed below its zero mark. Failure for the support line to hold could leave the 1.047 level in sight, where a lower channel trendline may stand alongside its December 2022 low.

On the watchlist: 200-day MA remains key resistance for USD/JPY

Declining US/Japan yield differential serves as a cap for USD/JPY upside this week, which failed to move past its key 200-day MA upon a retest. In addition, risk aversion seems to be benefitting the Japanese yen, more so than the US Dollar which has to digest the impending rate pause from the Federal Reserve (Fed) amid safe-haven flows. Multiple retests of the MA line have shown the 137.60 level as a key resistance to overcome.

That said, aggregate USD positioning against other G10 currencies remained in net-short territory, which may not seem to provide the conviction of a renewed upward trend for the USD/JPY just yet. Historically, a move back into net-long territory may coincide with some of the lows in the US dollar, so that may be something to watch over the coming months but the absence of it now suggests that recent moves could still be a consolidation phase for the next leg lower. Near-term support on watch will be at the 132.50 level, where an upward trendline support stands.

Thursday: DJIA -0.86%; S&P 500 -0.72%; Nasdaq -0.49%, DAX -0.51%, FTSE -1.10%