Asian equities closed mostly higher yesterday with crude oil price marching higher for an eighth consecutive session and Caixin China PMI surprisingly expanding to 50.4 in June – a positive surprise to many investors. Previously, market expected Caixin PMI to fall below the 50 watermark, given tight monetary conditions and deleveraging pressure in mainland.

Both strong official and private PMI readings suggest that the manufacturing sector remains resilient against the backdrop of seasonal headwinds. However, based on the inventory trends and contraction in finished goods, the expansion of activity in June is more likely to be a temporary bounce.

WTI oil price climbed for an eighth consecutive session to around $46.7 per barrel. The short-sellers were potentially squeezed; this could cause short-covering activities, which could fuel the rally in oil prices. Higher crude oil prices lifted the energy sector across Asia and underpinned Singapore’s oil & gas sector. Sembcorp marine, Keppel Corp and Yangzijiang continued to benefit from rising oil prices since last week.

The US dollar index seemed to find some support at around the 95.5 area and has since rebounded to the 95.8 area. Euro and GBP surged against the greenback last week, this caused by hawkish comments from ECB and BoE governors. They are now facing a technical correction. A strong dollar hammered precious metal prices, Gold tumbling 1.7% to five-week low of $1,223, and silver price almost reaching a two-month low of $16.2.

AUD/USD traded lower ahead of RBA’s interest rate decision, which will be revealed at 12:30pm Singapore time. The market does not expect the central bank to make any changes to its policy rate this time.  US markets are closed for Independence Day today and thus there will probably not be much volatility tonight.

Technical analysis:

Crude oil:

  • 10-day Simple Moving Average sloped upwards
  • MACD formed golden cross
  • SuperTrend (10,2) has flipped from bearish(red) to bullish (green)
  • Immediate resistance level at $47.0, next major resistance level will be $48.7.

GBP/USD:

  • Testing key resistance level at 1.300 area (123.6% Fibonacci Extension level) but failed to break-through
  • 10-Day Simple moving average slopped upwards
  • SuperTrend (10,2) remains in bullish set-up 
  • Momentum indicator RSI hit 70% oversold band and then retraced, indicating technical correction

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