A pull-back was seen among US and European equities last night, mainly due to profit-taking activities and risk-off sentiment ahead of the Federal Reserve’s impending rate-rise decision next week.
US factory orders rose 1.2% month on month, higher than the market consensus of 1% growth. Durable goods orders climbed 2%, also exceeding expectations. The data shows that new orders for US goods increased for a second straight month, suggesting that the recovery of the manufacturing sector started to gain momentum as rising commodity prices spurred demand for machinery.
Better-than-expected numbers led the market to believe that the Fed will have more reason to raise the interest rate in the FOMC meeting next week. The probability of a March rate rise now stands at a record high of 96%, almost fully pricing in this event.
As a result, the US dollar index rebounded overnight to around the 101.70 area. Technically, the uptrend of the US dollar index is well supported by the 10-Day simple moving average line, now around the 101.45 area.
The S&P 500 index has consolidated for a third consecutive day following Donald Trump’s first speech to Congress. Technically, the short-term trend indicator – the 10-Day simple moving average – has turned flat and the momentum indicator MACD has likely formed a ‘dead-cross’. Both indicators show that the index is facing short-term selling pressure and might continue to consolidate. Another key indicator, the ‘SuperTrend’, is still trending upward, suggesting that the mid-term uptrend remains intact.
Today traders will be waiting for the RBA’s (Reserve Bank of Australia) interest rate decision, widely expected to remain unchanged. Tonight both the US and Canada will announce their trade balances, and thus might trigger some volatility in USD/CAD at around 21:30pm Singapore time.
SPX 500 - Cash
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