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Market Brief: Hang Seng, Nikkei 225 Up on US-China Trade Deal; Shanghai Composite Lower

Nikkei 225
Nikkei 225

The highly-anticipated US-China trade deal sparked mixed reactions from the Asian equities markets today. The Hang Seng Index is trading much higher at 28,883.0, 109.5% or 0.38% higher following the release of details of the agreement. The Nikkei 225 was a little more subdued as it finished with smaller gains at 23,933.1, 16.5 points or 0.07% up from where it opened. On the other hand, the Shanghai Composite Index was in the red by 15.956 points or 0.52% at 3,074.081.

Risk currencies like the Aussie and Kiwi also seem to have benefitted from the deal. AUDUSD is up over 20 pips from its open price at 0.6640. Meanwhile, NZDUSD is 12 pips higher at 0.6915.

According to the Phase One Deal, both countries will still impose tariffs against each other’s exports. However, China’s promise to buy a staggering amount of US goods and relaxing its rules for importation of US farm products made investors excited about its effect on US (and global) growth. The deal also specified measures to police Intellectual Property theft and for China to stop devaluing the yuan.

Most of these details did not come as a surprise to investors. This be the reason why markets did not surge following the news.

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NZDUSD Outlook

On the hourly time frame, we can see that NZDUSD is testing resistance at the falling trend line (from connecting the highs of January 6, January 7, January 8, and January 13). This price, around 0.6630, also coincides with resistance at the 200 SMA. It’s also worth noting that a bullish flag seems to have materialized. This is evidenced by the consolidation in the last few hours which was preceded by a rally from last night’s New York session.

Keep a close eye at 0.6630. A stong bullish candlestick closing above this price could mean that NZDUSD is on its way to its January 10 highs at 0.6652 or 0.6670 where it peaked on January 8. On the other hand, a bearish close below today’s Asian session at 0.6625 will invalidate the bullish flag. It may mean that NZDUSD could fall to yesterday’s lows at 0.6580.