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Sentiment improves, RBA rate in focus

The closure of China and Hong Kong markets for the celebration of their 70th year anniversary infers that trading in the Asian session is likely to be muted today.

A rebound in US equity indices and the significant decline in gold prices suggest sentiment has turned positive; as markets unwind expectation of the delisting of Chinese companies following the statement by the US Treasury over the weekend.

Technically, gold price has entered into a bearish trend, with immediate support levels found at US$ 1,466 and US$ 1,446.

Crude oil prices fell over 2 percent as Saudi Aramco has restored its full capacity to before-attack level. Technically, Crude Oil Brent is attempting to find some support between US$ 58.0-60.0 ranges.

For currency traders, a rate cut to be carried out by the Reserve Bank of Australia is widely expected and has perhaps been priced-in since last week. The decision will be announced at 12:30pm Singapore time and will still likely deliver meaningful volatility to the Aussie pairs. AUD/USD is trading at 0.6753 this morning and immediate support and resistance level can be found at 0.670 and 0.680 respectively.

A string of Eurozone manufacturing PMIs this afternoon will serve as catalysts for EUR/USD, which has been bounded by a downward-facing channel in the last three months.

In Singapore, the stock market rebounded on Tuesday morning, lifted by technology (Venture), industrial (Sembcorp Mar), consumer discretionary (Jardine C&C), and financials (DBS).

Yesterday, China’s manufacturing PMIs surprised markets from the upside, and led to some debate on its sustainability. The Caixin PMI came in at 51.4, its highest reading in nearly 20 months. This is largely driven by domestic demand which helped to offset weak external demand as a result of infrastructure, industrial upgrading and tax & fee cuts. However, some believe that the expansion in output and new orders in the month of September has been largely driven by front-loading activities before the 1st – 7th October holiday, or so called ‘golden week’, and thus unsustainable.

Stock market behaviour reflected this bearish view, with Shanghai Composite falling nearly 1 percent on Monday.


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