Weekly Updates 24/7/23 –28/7/23 July 24, 2023

This weekly update is designed to help you stay informed and relate economic and company earnings to potentially value-add your CFD (Contract For Difference) trading via hedging (risk reducing). This article should be used for educational purposes only and not as financial advice. We urge all traders to carry out your own due diligence before submitting trades.

Recap for last week (17 July 2023 – 21 July 2023)

*These prices are taken based on the previous Monday’s opening price and the preceding Friday’s closing price.

Overall for last week, prices continue to soften although progress among countries remains uneven. Within the emerging markets some central banks took action early on which successfully brought down core inflation thus we may see rate cuts this year. The UK with very sticking inflation is experiencing structural challenges while China is facing potential deflation where it will need to fight longer to get inflation on the right path.

Updates for the week (24 July 2023 – 28 July 2023)

The data below showing the economic releases read as “Analyst’s estimate/ Consensus | Previous data”.

This week’s macro news mainly focuses on whether FOMC will hike the rates as we believe that the Fed will remain focused on fighting inflation even it it comes at the expense of economic downturn. However, a slowdown in the economy will have a silver lining for the markets as consumer spending reduce which would help on the downpath for inflation which allow the Fed to turn away from restrictive interest rate policy. Therefore, signs of economic weakness can be mitigated by the prospects of a less aggressive Fed. We do expect the Fed to hike the rate by another 25 basis points on July 26 and hold its policy rate steady over the course of the year.

This week’s corporate earnings are a powerful driver of the market’s boarder direction. Earnings season is swifing into high gear which offers additional guide for the market performance. The approaching end of rate hikes, along with some relief on the rising-expense front, could allow companies to showcase earnings resiliency, even in the face of slower demand. Investors mainly focuses on the big tech’s earning release this week as companies are still feeling pressure from some mixture of a rocky economy and their unexpectedly severe hangovers from the pandemic. The big techs will be asked what shapes their companies with their reduced headcount and how long it may take for them to get back on track.

If you hold equity positions in these stocks, you can hedge your positions using CFDs to mitigate the risk of disappointing earnings releases.

For those looking to speculate or capitalize on the increased volatility, CFDs provide leverage and ease of going long and short across a broad range of products available.

SIA (C6L): Potential Further Upside – by Sean

Trade Set-up:

Key Entry Price Pivot(s):

• $7.33

Recommended Trade:

• Long above $7.33, take profit at $7.48, stop loss at $7.29

Alternative Case:

• Short below $7.33, take profit at $7.11, stop loss at $7.41

Remarks:

• SIA has seen a strong uptrend following its positive earnings announcement on 16 May 2023
• On 30 June 2023, SIA pulled back and found support at the 20 EMA. SIA subsequently rebounded and has again pulled back to the 20 EMA, finding similar support
• We potentially look to take a long trade on SIA, playing the bounce off of the 20 EMA support level

USD/JPY rallies stalls near 142.00 as US Dollar bulls push forward

Trade Set-up:

• In a classic push to close higher, USD/JPY closed just below the 142.00 handle on Friday last week. From a technical perspective, the bulls won with 3 consecutive days of rise after the doji (indecision candle pattern) was formed on Tuesday. This was due to the strength in the USD Index (DXY) with expectations that policy divergence between the Fed and the Bank of Japan (BoJ) would escalate as the Fed is expected to raise interest rates further while the BoJ will continue maintaining its decade-long ultra-dovish policy stance, keeping interest rates unchanged.
• Fundamentally, the pair’s bullish factors remain intact, while on a technical front, price level has reached a resistance zone (pointed out on previous weekly updates).

Trade Execution:

• The chart can be interpreted both ways. Bear signals are when the SMA20 cuts the SMA50 from the top, coupled with RSI turning below 50. This would be cue for longs to exit their positions, or for short players to enter on what could develop as a bearish Head & Shoulder pattern.
• Bull signals are when SMA20 rebounds from SMA50 and continue remain above the SMA50 (taken as a consolidation point), while RSI remains above 50. Short players should therefore keep their stop losses close within the resistance zone.

If you have any feedback or questions, feel free to email us at samht@phillip.com.sg or onishathyeyn@phillip.com.sg or cfd@phillip.com.sg.