The Nikkei 225 was closed for today’s trading as Japan celebrates its National Foundation Day. However, Hong Kong and mainland Chinese stocks traded higher in today’s trading as market sentiment improved. The Hang Seng Index is trading higher by almost 370 points or 1.32% at 27,609.5. The Shanghai Composite Index is also in the green by 11.187 points or 0.39% at 2,901.674.
There were a few reasons why risk aversion eased in today’s trading. For one, US equities traded higher in yesterday’s trading. The bullish momentum in the New York session carried over in Asia today. Secondly, the rise in the number of confirmed cases of the coronavirus was smaller compared to Monday. China announced 2,478 for today but recorded 3,062 the day prior. Lastly, some Chinese companies re-opened for the first time today since the Lunar New Year celebrations. Consequently, this led to optimism that business activity in China would soon go back to normal.
Risk currencies like the Aussie and Kiwi also benefited from the improved sentiment as they led gains against the US dollar in today’s trading. AUDUSD is up by 0.41% at 0.6713. Meanwhile, NZDUSD is in the green by 0.13% at 0.6392. The Canadian dollar is also up against the US by 0.18% as USDCAD trades at 1.3292.
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On the hourly time frame, we can see that AUDUSD is testing a confluence of resistance around 0.6720. For one, this price coincides with the 100 SMA and 200 SMA. When you connect the highs of February 5 and February 6, we can see that this price coincides with the falling trend line. A shooting star has already materialized which is often interpreted as a bearish confirmation signal. It could mean that AUDUSD may soon fall to yesterday’s New York session low at 0.6670. This can be triggered by risk aversion stemming from negative developments on the coronavirus outbreak.
On the other hand, a bullish close above today’s Asian session highs at 0.6718 could mean that there are still buyers in the market. The currency pair may soon rally to last week’s highs around 0.6770.