Market Brief: Nikkei 225 and Shanghai Composite Post Modest Gains After Fed Rate Cut

Asian equities markets had mixed performances in today’s trading, following the Federal Reserve’s surprise rate cut yesterday. The Nikkei 225 was virtually unchanged when it closed with a 0.08% or 17.26-point profit at 21,099.99. Meanwhile, the Shanghai Composite Index had a 0.63% or 18.769-point gain at 3,011.666. On the other hand, the Hang Seng Index is trading lower by 0.48% or 126.5 points at 26,222.1.

Just as expected, central banks all over the world are stepping in to help stimulate global growth amid the coronavirus outbreak. It began with the RBA’s 25-basis point rate cut. The Federal Reserve then surprised markets yesterday when they announced a 50-basis point cut. Aside from these easing measures helping growth, they also aim to provide support to equities markets too. However, stocks have yet to rally following the rate cuts as concerns on the infection linger.

On the other hand, risk currencies are faring much better today. USDJPY is leading gains at 0.31%. AUDUSD and NZDUSD are the second- and third-best performers with 0.24% and 0.14% gains, respectively.

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GBJPY Outlook

On the daily time frame, we can see that the sell-off on GBPJPY stopped short at the 100 SMA. If there are enough buyers around the moving average at 137.60, we could soon see GBPJPY rally.

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The hourly time frame supports the bullish bias reflected on the higher time frame. GBPJPY has been consolidating in a downward slope after its aggressive sell-off. Consequently, a falling wedge pattern has formed. This chart pattern is considered as a bullish reversal signal. A bullish close above yesterday’s high at 138.54 could mean that GBPJPY may soon trade to 141.50 where the currency pair previously found support.

On the other hand, a drop below today’s low at 136.93 would invalidate this bullish setup. Instead it could signal further downside on GBPJPY, possibly to 135.70 where the currency pair topped on September 20.More content