While the Non-Farm Payroll report from the US on Friday provided some relief to the equity market, the Hang Seng index futures (HKEX: HSI) faltered in the early Tuesday session as trade data from China showed a weaker-than-expected domestic demand from the largest economy in the world. 

Recession fears eased on Friday, as the US reported a 253K increase in their Non-Farm Payrolls, significantly exceeding the 180K consensus. While the bulls have been enjoying most of the momentum since then, mixed data from China could change the trajectory ahead of the US inflation release tomorrow. Chinese imports decreased 7.9% year over year in March, while analysts expected a 0% change, signalling that local demand remains weak amid the highly anticipated economic rebound. While the market reaction was adverse, the US CPI data could instantly change the sentiment, as lower volumes are likely to persist until tomorrow’s release. At that time, traders could get additional insights into the Federal Reserve’s probable next move in their interest rate hiking cycle. 

Technical 

The 4H chart shows an ascending channel where the bears have taken control in pushing through the daily pivot support at 20,147 to test the 50-day moving average at 19,882. Looking toward tomorrow’s CPI release, a sticky report could boost the current bearish momentum toward the 23.6% Fibonacci retracement at 19,746 from the 25 April low. A breakdown of the channel support could lead to further downside, where support was established at 19,530 before reversing the retracement process back to the low at 19,390. 

Conversely, a soft report could confirm the sentiment of a potential policy pivot from the Fed in June, which could entice the bulls to break through the 38.2% Fibonacci retracement at 19,967 in an attempt to retest the pivot point at 20,147 after a sustainable break through 20,012 (S1). Higher resistance at 20,262 and 20,323, the 61.8% Fibonacci retracement could come into play if the bulls ride the return to risk-on as recession fears start to fade.  

Summary 

With the market reacting adversely to the slowdown in Chinese exports, the US CPI data could be pivotal in determining the market sentiment as we advance. The bears would need a sticky report to break down the ascending channel in a move toward 19,746. 

Sources: Koyfin, Tradingview