Market Brief: Hang Seng Down, Nikkei 225 Up, USDJPY Spikes On US-China Consensus

Asian equities markets were mixed early in Tuesday’s session with the Nikkei 225 up 80 points or 0.35% at 23,373.3 and the Hang Seng index down around 50 points or 0.20% at 26,940.3. Meanwhile, USDJPY spiked to its highest level in almost two weeks at 109.20.

Risk appetite from last night’s New York session may have spilled over to the Nikkei 225. The only report that came out of Japan this morning was the BOJ core CPI report which showed that inflation is up 0.3% from a year ago. While it missed the 0.4% forecast, there was very little reaction to the report.

US-China Consensus

On the other hand, we did get some updates regarding the US-China trade negotiations. The Chinese Commerce Ministry announced earlier that the two countries have come to a consensus in dealing with issues. There are speculations that in a phone call between US and Chinese officials, tariff cuts were discussed. These, however, were not confirmed by either party.

More Political Uncertainty in Hong Kong

Although this news was positive for equities markets, the Hang Seng index failed to sustain a rally. A new wave of political uncertainty kept investors jittery. This is sparked by the city’s chief executive, Carrie Lam, who showed no sign of compromise after a landslide victory of the pro-democracy party in local elections. Not even the debut of Chinese conglomerate, Alibaba, which posted a 7% gain today could buoy Hong Kong’s stock index.

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USDJPY Outlook

USDJPY failed to find enough bids above the 109.00 psychological handle. A sustained rally above the high of November 7 at 109.50 needs to happen for the currency pair to have a shot at testing resistance at 110.64.

If there are not enough buyers in today’s trading, USDJPY could retest support at the rising trend  line from connecting the lows of August 26, October 8, and November 21. If it does not hold, we could see the currency pair drop to its October lows at 106.42.Download our latest quarterly market outlook for our longer-term trade ideas.

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