Asian markets retreat today halting the sharp rally from March lows after the Fed decision to keep interest rates unchanged while Governor Powel said that it would increase rates until 2022 amid the sharp drop in employment.
Federal Reserve will continue to buy Treasuries and mortgage-backed securities as it projects a contraction of 6.5% this year. The unemployment will stand at 5.5% higher than pre-coronavirus levels while inflation is seen at 1.7%. Fed might take extra actions if need it, such as the Yield Curve Control for specific interest rates maturities but for now, is not the first option.
After an impressive rally, the last trading sessions Wall Street ended mixed, Dow Jones and S&P 500 finished in negative territory while Nasdaq was finished higher.
The Nikkei index finished 2.82% lower at 22,472 after Japan’s Business Sentiment Index dropped to an 11-year low of -47.6 in the second quarter. The Hang Seng Index is 1.66% lower at 24,639. The Shanghai Composite index is 0.81% lower at 2,920 while the Singapore Straits Times index is 2.98% lower at 2,716. The ASX 200 is 1.85% lower at 6,034.
Crude oil price follows the risk-off sentiment and trades lower. Yesterday Moody’s Investors Service, revised down the 2020 average price forecast for Brent oil to $35 per barrel and $45 per barrel for 2021. WTI Crude oil futures are 2.45% lower at 37.80. Brent oil is 2.19% lower at 40.28.
ASX 200 snap the seven days winning streak and is 3.05% lower at 5,960 giving up almost all the gains of the week amid a pullback in global equities following the dovish tone from Fed. Australia Consumer Inflation Expectations came in at 3.3% below the expectations of 4.2% in June.
On the technical side, the ASX 200 index keeps the positive momentum despite the sharp drop today. A test of the 100-day moving average is possible, and that will provide a significant signal about the next move. A break below would cancel the bullish momentum and might push the index down to 5,600 level.
On the downside, immediate support for the ASX 200 index stands at 5,949 the daily low. In case of a move lower, bears might test the next support area at 5,922 the 100-day moving average. Next support for the ASX index will be met at 5,709 the June 1 low.
On the flip side, first resistance stands at 6,148 the daily top. Next hurdle will be met at 6,212 the high from June 9. The 200-day moving average is the next supply zone at 6,321.