The US dollar strengthened against its G10 peers ahead of a key CPI data tonight, which will be carefully watched by forex and equity traders to assess the impact of rising inflation to future monetary policy directions.
Recently, a strong US jobs data spurred a round of panic selling in treasuries and equities as the fear of accelerated monetary tightening loomed market. If the CPI data beat market expectation tonight, it could potentially lead to rising treasury yields and worsen the situation. According to Thomson Reuters, market expects CPI to rise by 0.3% on a month-to-month basis.
USD/JPY has broken down a key support level of 118.0 and slided down to 117.8 area this morning due to strengthening of the US dollar. Its near term trend turned bearish with 10-Day Simple Moving Average line resuming its trajectory downwards and SuperTrend (10, 1.5) flipping down. The next key support level could be found at 106.8 area (61.8% Fibonacci Retracement).
EUR/USD surged for a second day to 1.234 area, with its immediate support and resistance level at 1.228 (100% Fibonacci extension) and 1.238 (127.2% Fibonacci extension) respectively.
US equities rebounded mildly for a third day with S&P 500 index finishig 0.26% higher. Although volatility dropped a little bit from the previous day, market sentiment remained fragile and traders are dealing with caution ahead of inflation and retail sales data tonight.
Economic Calendar – US CPI MoM
Singapore 4Q final GDP readings beat market expectation, finishing the year with strong footing backed by global economic upswing. The island country’s economy expanded at an annualised pace of 3.6% yoy, higher than consensus forecast of 2.9%.
UOB posted record full year earnings of S$3.39B this morning, with higher net interest income and fee income the main drivers of profit growth in the fourth quarter, which surged 16% QoQ. With strong earnings, the lender lifted core dividend by 80 cents per share and a special dividend of 20 cents for 2017.
Better-than-expected GDP data and upbeat earnings from UOB is likely to provide strong support for the Straits Times Index today. As many Asian markets – China, Hong Kong, Singapore, Malaysia and Indonesia will be closed for the Lunar New Year celebration by end of this week, traders may prefer to stay on the side-lines or take some hedging measures – such as using Guaranteed Stop Loss Orders (GSLO) to protect their portfolio.
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