Last night, Wall Street experienced further de-risking as the absence of bullish catalysts and prevailing risks such as elevated Treasury yields, higher oil prices, and a gridlock in the US government funding bill weighed on the market. This risk-off sentiment was reflected in the VIX, which reached its highest level close since May 2023. The US dollar also continued to strengthen, supported by slightly hawkish Fedspeak. Meanwhile, downside surprises in US new home sales and US consumer confidence suggested moderating growth conditions in response to tighter policies.
In terms of the Nasdaq 100 index, sellers remain in control as it broke below an ascending channel pattern and reached a new three-month low. Its failure to defend the Ichimoku cloud support and its 100-day moving average last week indicates a bearish trend. The next important support level to watch is at 14,200, as its weekly Relative Strength Index (RSI) tests the 50 level for the first time since March. This will be a crucial test for buyers aiming to maintain the broader upward trend.
Asian stocks are expected to have another downbeat session today, as the Nikkei, ASX, and KOSPI were all trading lower at the time of writing. The Hang Seng Index hit a new nine-month low due to increasing concerns about the potential liquidation of China Evergrande. China’s August industrial profits showed a softer decline, but the data still revealed a year-on-year decline as property sector risks linger. In Australia, the Consumer Price Index (CPI) data met expectations, leaving rate expectations well-anchored for the Reserve Bank of Australia’s (RBA) next week. However, there is still uncertainty about the need for additional rate hikes early next year. The AUD/USD pair has been in a ranging pattern over the past month, with sellers currently in control as risks to China’s growth and the downbeat risk environment weigh on the bulls.