Worse-than-expected China trade data and US non-farm payroll readings released last Friday weighed on sentiment, but equity volatility index didn’t really pick up much to reflect this shock.
February non-farm payroll added only 20K versus consensus forecast of 180K, while the unemployment rate dropped 0.1 percent to 3.8 percent. This reading reassured market that Fed will likely remain ‘patient’ in the FOMC meeting later this month and start cutting the pace of balance sheet normalisation soon.
Dollar index retraced as a result and US equity indices continued their downward trajectory into a consolidation phase. Technically, the S&P 500 index faces immediate support level at around 2,700 points. Its short-term trend has turned bearish with a downward slope of 10-Day SMA and MACD forming a bearish crossover. Breaking down below 2,700 will lead its SuperTrend (10,2) to turn bearish and could lead to a deeper correction.
For China, a stunning 20 percent drop in its exports in February and a much-disappointed trade balance reading triggered broad sell-off in its equity markets. Shanghai Composite lost 4.4% and Shenzhen was down 3.25%. This huge intraday move reflected the immaturity and ‘herd effect’ nature of China’s emerging equity market, although market participants believe that this is a ‘healthy correction’ in the midst of a bull run.
Trade talk and Brexit vote are under the spotlight this week, and uncertainties surrounding those sent gold price higher to the US$1,297 area. GBP/USD seemed to be under pressure as if the Brexit plan is rejected in parliament vote on Wednesday. The 29 March deadline is likely to be delayed to avoid a hard crash.
Crude oil prices is largely unchanged on Monday, as traders struggled to strike a balance between poor economic data and fallings US rig count numbers. Baker Hughes reported on Friday that the number of US oil rigs fell for a third consecutive week to 1,027 and Canada’s reading declined by 22 to 189. This suggests the crude oil production from North America is cooling down. Technically, Brent Crude oil price is trading in a ‘range bound’ setup, which traders usually try to avoid. Immediate support and resistance level can be found at US$63.7 and US$68.1 respectively.
US SPX 500 - Cash
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