Originally published by AxiTrader
Asian regional markets look set to continue to bathe in the afterglow of the rally in US stocks as confidence grows that the global economy is looking forward to one of its best periods of synchronised growth in more than a decade during 2018.
Last night's report from Caterpillar (NYSE:CAT), which beat profit and sales estimates, underwrote what has been improved sentiment about the outlook for global growth. The company said that its results were driven by strong demand from North America and China.
That result, along with other earnings reports from companies like 3M, and the forward guidance from Caterpillar helped push the Dow Jones Industrial Average to a new record close up 167 points at 23,441. Certainly, the S&P 500 and Nasdaq 100 lagged with gains of just 0.16% and 0.2% respectively.
Likewise the rally in metals markets again yesterday underscores the positive outlook and improved investor sentiment and risk appetite.
It's a potent and positive cocktail to support sentiment in Asia and this combination should be positive for Asia's stock markets in trade today.
Across AsiaFX however, the outlook is more mixed and less positive for local pairs as the US dollar nears critical junctures against the majors and pushes mostly higher against DolllarAsia.
The yen is back up near the high for the week sitting at 113.95 this morning. It looks headed toward 115.00/50 as US interest rates and bond rates rise. last night the 10-year Treasury hit, but couldn't sustain, important overhead resistance at 2.42%. They sit at 2.40% at the moment. On the cusp of an important breakout which could herald the start of a bigger sellf off in rates and further support for the US dollar.
That is likely to put further pressure on AsiaFX rates.
Already the USD/SGD has broken the downtrend from the January highs and yesterday consolidated that break with a retest of the trendline. At 1.3625 DollarSing is just 15 points from triggering a long on my system. As noted yesterday a move above 1.3685/90 need to confirm a move to 1.3804 Fibonacci resistance.
Likewise, other currencies are moving lower against the US dollar today. USD/PHP has had a big topside break. It's continued to push higher on over the past year on what looks like a substantial increase in interest, and thus volume.
Much depends on the outlook for the US dollar but as long as 51.50/75 holds USD/PHP looks biased higher.
Bond rates, US data, and the fed are the keys to the outlook for DollarAsia. But while the region's currencies may come under pressure the increased competitiveness that brings can help growth and local stocks markets as well.
On the data front today:
- South Korean Consumer Confidence for October is out with the market expecting a print of 110 adfter last month's 107.7.
Have a great day's trading.