Profit-taking activities dragged Asian equities down yesterday, with the Hang Seng and Singapore’s STI closing 0.4% and 0.5% lower respectively. 

US equities, however, remained resilient ahead of Wednesday’s FOMC meeting, as market participants anticipate no change in the Fed’s interest rate, and only moderate balance-sheet shrinking measures, if any. 

The Dow Jones and the S&P 500 indices advanced further into record highs, a sign that fears over quantitative tightening were largely underpinned by confidence in the fundamental level. US corporate earnings have registered three consecutive quarters of improvements after bottoming out in the second half of 2016. The drastic weakening of the US dollar will also help to drive up US exports and boost MNCs’ overseas earnings due to favourable forex gains.

The US Dollar Index has been hovering around the 91.6 area – slightly above its three-year low - for the last two days. USD/JPY is flat this morning despite Trump’s speech to the UN and a 7.2 magnitude earthquake in Mexico last night. 

FX traders may expect higher volatility in major dollar pairs late tonight, when the FOMC’s interest rate decision and normalisation plan comes out, at around 2am Singapore time. 

Japan’s exports and imports rose 18.1% and 15.2% respectively in August, both beating market expectations. The strong growth in trade was fuelled by surging shipments to China, the US and the EU - a sign that global recovery is gaining momentum. The Nikkei 225 index extended its four-day gains in an attempt to break out of the key resistance level at 20,200 points. 

Technical Analysis:

US 30 - Cash

  • 10-Day Simple Moving Average sloped upwards
  • SuperTrend (10,3) has flipped upwards, suggesting that an uptrend has formed 
  • Price has broken out above the 138% Fibonacci extension level of 22,200 points 
  • Its next resistance level could be found around 22,500 points (161.8% Fibonacci extension)
  • Momentum indicator MACD has formed a bullish crossover, indicating strong upward momentum

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