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Week Ahead (1/3): Big week for data

GOLD TECHS

Key S/T Resistance Remains Exposed

BRENT TECHS

(H2) Bullish Extension

EQUITY TECHS

E-MINI S&P (H2): Support Remains Intact

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The recently announced 50bp RRR cut from the PBoC has opened up the gates when it comes to speculation re: further loosening of PBoC monetary policy settings.

  • This view has gained further credence in the wake of a WSJ article pointing to senior CCP members pressuring the PBoC into the RRR cut, which went against recent guidance issued by some of the Bank’s own senior leadership team. A sign that President Xi was keen to exert influence.
  • Elsewhere, the readout at the end of the recent Politburo meeting struck a dovish tone, with focus centring on tweaks to the language surrounding the property space in the wake of the well-documented headwinds currently pressuring the sector (which accounts for ~25% of broader Chinese economic activity, based on a relatively wide range of estimates), as well as a more pro-growth orientation in general.
  • The prospect of deeper policy easing in China, alongside a more-growth friendly approach & reduced worry re: the mortality threat posed by the omicron COVID strain, has supported the CSI 300.
  • This has allowed the index to move to the highest levels observed since July during today’s morning session, closing the gap lower from the 23 July close, clearing the 200-DMA in the process. Bulls now look to the 38.2% retracement of the Feb-July drawdown (5,147.90).
  • Note that the 21- & 50-DMAs have started to turn upwards, while the 200-DMA is still downward sloping.
  • The 14-day RSI has moved above the 70 mark i.e. into overbought territory, but this is not considered a bearish signal until we see a pullback below that particular line in the sand.
  • Observable international capital flows have also been supportive for the Chinese equity space, with 7 consecutive sessions of net buying via the northbound leg of the Hong Kong-China stock connect schemes observed as of typing. This morning’s session has positioned net buying via this channel at the highest level witnessed since June, although this could of course change during the afternoon.
Fig. 1: CSI 300

Source: MNI - Market News/Bloomberg