Asian stock markets and risk currencies traded higher this morning on hopes that central banks around the world would soon ease monetary policy to stimulate economic growth. The Nikkei 225 finished today’s trading 201.12 points or 0.95% higher at 21,344.01. Meanwhile, the Shanghai Composite Index closed at 2,970.931, up 90.627 points or 3.15% higher. The Hang Seng Index also looks on track to finish today higher. As of this writing, it is up close to 160 points or 0.60% higher at 26,284.1.
The coronavirus outbreak has sparked the largest sell-off seen across equities markets since the global financial crisis of 2008. With this, it’s not unbelievable to think of central banks working together in an effort to ease market concerns and help stimulate the global economy. Speculations are that we would see a series of rate cuts beginning with the RBA tomorrow, to be followed by the BOC, and the Federal Reserve.
This optimism has even clouded concerns that may have been brought about by negative data from China this morning. According to Market, the Caixin manufacturing PMI report printed at its lowest level since 2004 at 40.3 and missed the 46.1 forecast.
Risk currencies are also trading higher this morning. AUDUSD is leading gains at +0.43%, followed by EURUSD which is up at 0.37%. Meanwhile, USDJPY is in the green by 0.24%.
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AUDNZD Outlook
On the daily time frame, AUDNZD has recently made higher lows following a series of lower lows. Consequently, an inverse head and shoulders pattern has materialized. In forex trading, this chart pattern is considered as a bullish reversal pattern. As of this writing, the currency pair is testing resistance at the neckline around 1.0475. A bullish close above the high of February 11 at 1.0503 would effectively break the neckline resistance. It could mean that there may be enough buyers in the market to push AUDNZD to 1.0670 where it previously found support.
On the other hand, a close below last week’s lows at 1.0380 will invalidate this bullish setup. Instead, it could mean that AUDNZD may soon drop to its recent lows at 1.0320 where it bottomed in January.
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