Asia Open

The Asian session was set for a mixed open, with Nikkei -0.51%, ASX +0.34% and KOSPI +1.16% at the time of writing. There was not much going on in the economic calendar overnight, but market sentiments continue to reel in from ongoing geopolitical risks and uncertain Federal Reserve (Fed)’s policies, with the ‘Magnificent Seven’ stocks taking the chance for further unwinding.

Notably, broad-based weakness was presented in semiconductors, with Nvidia down 3.9% and the broader PHLX Semiconductor Sector down 3.3%, which could see some follow-through weakness in tech stocks across the region as well. Overall, this comes amid falling Treasury yields, with the US dollar (-0.3%) taking a breather following its recent rally.

The economic calendar this morning saw a weaker Australia’s employment front. Unemployment rate was a tad higher at 3.8% from previous 3.7%, but below the 3.9% expected. More notably, March employment contracted by 6,585, which comes as a surprise versus the 10,000 job gains expected. The weaker labour conditions could see some rate expectations leaning towards earlier cuts from the Reserve Bank of Australia (RBA), potentially front-running the Fed in policy easing if the weakening in labour market continues in the months ahead.

Look-ahead: Netflix’s earnings

With the current weak market sentiments, eyes will be on whether upcoming Netflix’s earnings can save the day. A strong beat in subscriber gains and positive set of guidance last quarter has driven a surge in share price and market participants will be watching if the momentum can continue.

High expectations are baked in at the moment however, with revenue expected to deliver a 13.7% year-on-year rise to US$9.3 billion while earnings per share (EPS) may grow 56.6% to US$4.51. Net subscribers’ addition is expected to come in at 5.01 million, almost three-fold the 1.75 million addition from the year before. The broader risk-off environment may drive market participants to find fault in the event of any miss in the metrics to deepen the market retracement further.

What to watch: AUD/USD hovering at five-month low

The AUD/USD has an initial downside reaction to the weaker employment data this morning, which supports earlier policy easing from the RBA. Failure to cross the daily Ichimoku Cloud resistance last week has paved the way for AUD/USD to unwind more than 3% over the past week, with the pair touching a new five-month low. The recent sell-off marked a breakdown of a consolidation base at the 0.646 level, with its daily relative strength index (RSI) trading below the 50 level as a sign of sellers in broader control.

Ahead, any break below the recent April low at the 0.639 level may call for further move towards the October 2023 low at the 0.627. On the upside, the 0.646 level will be an immediate resistance to overcome.

AUD/USD Mini Source: IG charts