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Market Brief: Hang Seng Index, New Zealand Dollar Down On Hong Kong Bill


The Hang Seng Index recouped some of the gains it posted over the past two days. Hong Kong’s equity index is currently down around 170 points as it trades around 26,920.0. Meanwhile, on forex trading, higher-yielding currencies also started the day lower. AUDUSD slipped below the 0.6800 handle soon after the market opened. The New Zealand dollar exchange rate is also down by 10 pips to 0.6419, as of 7:35 am GMT today, November 20.

Last night, the US Senate passed The Hong Kong Human Rights and Diplomacy Act. This weighed heavily on market sentiment because it could undermine trade negotiations between the US and China. Remember that tariffs on Chinese goods imported to the US scheduled to take effect by December 15. Protests in Hong Kong have been directed towards the city-state maintaining its autonomy from mainland China. The bill, if passed into law, will ban the sale of munitions like pepper spray and tear gas that will be used by Hong Kong police to crowd control protesters.

Unsurprisingly, this news garnered negative reactions from the Chinese government. The state-run press agency of China, Xinhua, described that the government “strongly” condemns the move by the US Senate.

The White House has yet to release a statement on whether or not US President Donald Trump will approve or veto the bill. We will likely see risk aversion dominate trading if the President hints at the likelihood of the bill turning into law.

In other news, data from Japan showed that the country posted its eighth consecutive month of trade deficit. Exports in October were 300 billion yen lower than imports and the number missed expectations for a trade surplus of 260 billion yen.

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NZDUSD Outlook

Aside from news surrounding the US-China trade negotiations, the most important forex news for today is going to be the FOMC Meeting Minutes due to be released at 7:00 pm GMT. If the minutes confirm the market expectations that the Fed will not cut rates further this year, the dollar will probably trade higher. On the other hand, if the minutes hint that the Fed is open to easing rates even further, we could see a sell off in the US dollar.

The New Zealand-US dollar exchange rate is trading within a tight range ahead of the European market open. A close below Asian session lows at 0.6412 could push the currency pair down to test support at 0.6400. The psychological handle coincides with the rising trend line (connecting the lows of November 12 and November 19) and the 61.8% Fib (yesterday’s low to today’s Asian session high). If support does no hold, the next levels to watch out for will be 0.6380 and 0.6357 where it bottomed on November 19 and  November 14, respectively.

However, if there are enough buyers in today’s trading, we could see the New Zealand-dollar exchange rate rise to resistance at 0.6434 or maybe even 0.6465 (high for November 4).

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