Chinese Data and Central Banks in Focus

S&P 500, HANG SENG, ASX 200, ASIA-PACIFIC MARKET WEEKLY OUTLOOK:

Dow Jones extended a record rally despite weakness in the tech sector
10-year Treasury yield surged to a fresh 12-month high of 1.623 while the US Dollar rebounded
Chinese data, FOMC, BoE and BOJ meetings are in focus this week

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Chinese Data, Yields, FOMC, BoE, BOJ, Asia-Pacific Stocks Weekly Outlook:

Traders are facing a busy week ahead in terms of macroeconomic events, with the Fed, BoE and BOJ having their monetary policy meetings and interest rate decisions due on Wednesday, Thursday and Friday respectively. Amid rising longer-term yields around the globe, central banks’ view on inflation and economic recovery will be closely scrutinized by traders for clues about their future monetary guidance.

Among a slew of key economic data and central bank gatherings, the FOMC meeting is the most significant one and may have a large impact on the US Dollar index (DXY), yields, stocks and precious metals. A 379k rise in US Non-Farm Payrolls (NFP) in February, smooth vaccine rollouts and a better-than-expected University of Michigan consumer confidence reading may encourage the FOMC to adopt an improved outlook as the central bank lays out an outcome-based approach to monetary policy.

Fed Chair Jerome Powell has reiterated that the current set of monetary stimulus measures is “appropriate” and showed reluctance to address rising longer-term yields. However, any upward revision in Fed officials’ summary of economic projections (SEP) would probably encourage further rise in rates, which may dampen stock market sentiment. On the other hand, if Powell changes his tune and signals appetite for pushing asset purchases further down the curve to contain rising long-term borrowing costs, this would likely boost global equities alongside the US$ 1.9 trillion federal spending bill.

US 10-year Treasury Yield Climbs to a 12-Month High

Chart by TradingView

On Monday, the release of Chinese industrial production and retail sales data will likely set the tone for Asia-Pacific trading. The world’s second-largest economy is forecasted to see its industrial production expanding at 30% YoY, and retail sales surging 32% YoY due to a low base in the previous year as the Covid-19 pandemic outbreak curtailed economic activity at the beginning of 2020. Industrial production was underpinned by strong export activity and a recovery in domestic demand, while retail sales was likely driven by decent rebound in e-commerce and online catering spending. For more economic updates, please clickDailyFX calendar.

Asia-Pacific equities kicked off the week with a cautiously optimistic tone after the Dow Jones and S&P 500 indexes both finished at record highs last week, while the Nasdaq 100 index closed lower. Australia’s ASX 200 indexopened 0.23% lower, dragged by information technology (-0.76%) and consumer discretionary (-0.20%) sectors, while defensive-linked utilities (+0.68%) and consumer staples (+0.13%) outperformed.

Hong Kong’s Hang Seng Index (HSI) is poised for a modest rebound on Monday after suffering a heavy selloff last Friday. Chinese data release at 2:00 GMT may define the direction for Hong Kong stock trading today.

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S&P 500 Index Technical Analysis:

The S&P 500 index has likely resumed its upward trajectory after briefly dipping below the “Ascending Channel” in early March. The index breached above the 20- and 50-day Simple Moving Average (SMA) line, suggesting that near-term trend has likely flipped upwards. An immediate resistance level can be found at 3,995 (127.2% Fibonacci extension) whereas an immediate support level can be found at 3,893 (100% Fibonacci extension). The MACD indicator has formed a bullish crossover, underpinning upward momentum.

S&P 500 Index – Daily Chart

ASX 200 Index Technical Analysis:

The ASX 200 index remains in an “Ascending Channel” but upward momentum appears to be fading as suggested by the downward-sloped MACD indicator. The overall trend remains bullish as suggested by upward-sloped 50-day SMA line, but a minor correction seems to be underway. Holding above 6,730 – the 161.8% Fibonacci extension level – may pave the way for further upside potential towards 6,935 – the 200% Fibonacci extension.

ASX 200 Index – Daily Chart

Hang Seng Index Technical Analysis:

The Hang Seng Index hit a strong resistance level at 31,044 (76.4% Fibonacci retracement level) in mid-February and has since entered a consolidative period. Prices appear to be trending lower within a “Descending Channel” recently as highlighted in the chart below, with consecutive lower highs and lower lows forming. The 20-day and 50-day SMA lines have formed a bearish crossover, suggesting more selling pressure might follow in the days to come.

Hang Seng Index – Daily Chart