US equities soared for a third consecutive day, backed by strong corporate earnings.

The S&P 500 index closed at 2,850 points, a step away from its all-time-high of 2,873 that was seen in Jan 18. Better-than-expected earnings of Berkshire Hathaway and higher crude prices were among the positive catalysts behind the rally. Technically, the S&P 500 index is trending upwards within an ascending channel formed since early April. Its immediate resistance level could be found at 2,847 (138% Fibonacci Extension) and 2,886 (161.8% Fibonacci Extension) respectively.

In Asia, China equities continued to consolidate as capital flee to bond market seeking for safety. The Shanghai Composite tumbled over 5 percent over the last four trading sessions, retesting a key support level of 2,700 points. Hang Seng and Straits Times Index were also affected at the sentiment level, with both markets been pulled down as A-share slided. The immeidate resistance for Hang Seng Index could be found at around 28,000 points area.

The yuan’s strength will be tested on Wednesday when China’s July trade balance is due to release. Stronger-than-expected readings are likely to dampen the bearish bets on yuan following an eye-watering 6% depreciation of the currency over the last two months, which might provide support to the country’s exports and offset some of the impact of US tariffs. A miss on exports, however, could lead to further weakness towards the next major support at around 6.9-7.0 area. PBoC has already implemented levy on forex forwards in an attempt to stablise the currency via higher borrowing cost for yuan bets.

Today, traders will be eyeing the RBA interest rate decision, which is expected to remain unchanged in light of a softer housing market, tepid wage growth and exposure of global trade war. The AUD/USD was mostly ranging between 0.732 – 0.745 area over the past month and any significant deviation from earlier expectations will likely result in rising volatility.

US SPX 500 Index

China Trade Balance – Exports YoY

By Margaret Yang in Singapore

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