US equities extended its best quarterly rally seen since 1998 into April trading, with all three major indices surging more than 1.1% overnight.

Sentiment has been boosted by a positive swing in China’s latest manufacturing PMI readings, and a higher-than-expected US ISM manufacturing gauge despite a disappointing retail sales reading. A strong upturn in the ISM’s employment gauge indicates the US manufacturing sector could continue to improve.

The S&P 500 index surpassed its previous high seen in late March, closing at 2,865 points. Its immediate resistance can be found at 2,900 and then the 2,940 area. Financials (+2.4%), industrials (+2.07%), materials (+1.5%), communications (+1.45%), IT (+1.4%) and energy (+1.37%) were among the outperformers. Defensive utilities (-0.71%), real estate (-0.28%) and consumer staples (-0.21%) were among the worst performers. This pattern may provide some guidance for Asian trading today. 

Brent crude oil's price registered a big 2.4% gain overnight, moving closer to $70 mark. Oil prices are gaining upward momentum as China’s manufacturing activity pickup is boosting the demand side, and uncertainties surrounding the Iranian sanction waiver extension are lifting prices on the supply side. Technically, Brent oil is riding an uptrend trend, with both 10-Day SMA and SuperTrend (10,2) both sloped upwards. Its next resistance level can be found at the $72.5 area (61.8% Fibonacci retracement). Traders will also look at this Wednesday’s DoE crude oil inventory data for supply-demand relationship clues.

Crude Oil Brent - Cash chart

Aussie traders will embrace higher volatility at 11.30am (SGT) as the Reserve Bank of Australia (RBA) announces its interest rate decision. Consensus is no change this time round, but traders are looking for any dovish messages, as economic indicators have turned sour lately. In fact, the market is now seeing the possibility of one or two rate cuts this year.

Recent data shows that although employment market remains strong in Australia, GDP growth has slowed down significantly to 0.4% in the last quarter. The housing market has fallen sharply since 2018, weighing down household assets, consumption and inflation. The debt level of Australian households stands at the highest level among developed countries, and the risk of high leverage is now increasing as economy slows down.

AUD/USD is trading lower this morning at 0.710 area. The four-hour chart suggests it's a short-term trend which has turned bearish, with support at the 0.706 area.

 

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