Major US indices found room for some relief to start the week, after comments from China and Japan authorities supported their respective currencies and triggered a pullback in the US dollar (-0.5%) – its sharpest single-day drop in two months. Notably, the Nasdaq gained 1.1% despite a subdued showing in US Treasury yields, with the heavy-lifting revolving around a handful of big tech stocks. Individual corporate news seem to account for the uneven performance, with Tesla up 10% on Morgan Stanley’s rating upgrade, while both Meta and Amazon were up more than 3%.

Ahead, sentiment surveys in Australia and Germany as well as UK employment data will be monitored, however any market movements could be transient in the days leading up to tomorrow’s release of the US Consumer Price Index (CPI) data. Given that more Fed policymakers are now emphasizing data dependence and lowering their rhetoric regarding rate hikes, the upcoming US inflation data will be crucial in determining whether the Federal Reserve (Fed) will leave the door open for additional tightening in November or December.

Upcoming market moves may also depend on whether Apple can convince investors of its new products at its upcoming event, given the company’s heavy weightage in major US indices. Seasonality over the past 20 years has not been in favour however, with average performance generally ranging to slightly lower in the second half of September.

On the daily chart, the US$180.00 level, where its 100-day moving average (MA) corresponds with a 23.6% Fibonacci retracement (from its January 2023 bottom to July 2023 peak), is now proving to be a critical hurdle to overcome after falling below its Ichimoku cloud support. As of right now, the moving average convergence/divergence (MACD) crossover above the crucial zero level on the daily chart has been denied by the bears. However, with the formation of a long-legged candle last week, some dip-buying was observed at the US$173.54 level, which will now be an important support level to keep.

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With Nikkei +0.38%, ASX -0.41%, and KOSPI -0.29% at the time of writing, Asian equities appear to be headed for a mixed open. Although some paring of initial gains still indicates towards some misgivings ahead of China’s data dump on Friday, Chinese equities tried to regain its footing, with the Nasdaq Golden Dragon China Index up 1.2% overnight. Although the data on retail sales and industrial production are likely to moderately improve, the overall pattern in China’s economic data over the previous three months has been one of unfavorable shocks.

Renewed warnings from the People’s Bank of China (PBoC) on yuan speculation has a -0.8% impact on the USD/CNH yesterday, following a bearish MACD divergence displayed on its daily chart. Further tightening of bulk dollar purchases by domestic firms will likely provide some follow-through to recent selling pressure, with the support confluence zone around the 7.230-7.260 level now placed on the radar as a key test for buyers ahead. The level marked a series of support lines, ranging from its Ichimoku cloud on the daily chart to an upward trendline support.

It is a major week for the EUR/USD, with the US CPI and ECB rate decisions lined up on the horizon this week as key driving forces for the pair. Since mid-July this year, the pair has retraced as much as 5.2%, before attempting to stabilise lately on some US dollar weakness to start the week.

Technical analysis of the daily chart may indicate a potential bullish divergence for the time being because the RSI has failed to make lower lows on recent bottoms, which may indicate a reduction in selling pressure. However, a rise back over the resistance level of 1.080, which marks the lower trendline of a previous rising channel since the year’s beginning, may be necessary for the bulls to gain more confidence. Given that its weekly RSI is still trading below the critical 50 mark for the first time since November 2022 and hasn’t crossed back into its prior channel pattern, recent advances may still be subject to some uncertainty.

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