Market Brief: Nikkei 225, Hang Seng, and NZDUSD Trades Higher on Risk Appetite and RBNZ

Nikkei 225 rose higher by 164.9 points or 0.71% at 23,200.1 while the Hang Seng index was up 154.5 points or 0.59% at 26,217.0. USDJPY finished yesterday’s trading higher after it rebounded from an intraday low of 108.42. It closed with a 13-pip gain at 108.84. Meanwhile, NZDUSD traded higher in today’s Asian session. The currency pair rallied 42 pips from its opening price to 0.6561.

Risk Appetite Up on Renewed Trade Deal Hopes

Asian equities benefitted from risk appetite that spilled over from yesterday’s New York session. A report from Bloomberg relieved concerns that the US and China may not strike a deal anytime soon. According to people close to negotiations, the two countries are “moving closer” to a deal. This was contrary to earlier reports which said that US President Donald Trump is not in any hurry to finalize an agreement with China. Yesterday’s report went as far as to say that a phase one deal could be announced before the December 15 deadline.

Japan to Launch Economic Package

In other news, Reuters earlier reported that the Japanese government is set to announce a 26 trillion yen economic package. It is anticipated to boost GDP by 1.4%. Bank of Japan (NOJ) Board member Yutaka Harada also commented that the central bank does not need to ease monetary policy any further at this time.

RBNZ Announces New Capital Requirements

Meanwhile, RBNZ Governor Adrian Orr took centerstage earlier today. He announced new capital requirements for banks in an effort to make New Zealand’s banking system more resilient. It is now mandatory for local banks to hold an extra 13.1 billion NZD in capital by 2027. This announcement was bullish for the New Zealand dollar because initially, the deadline was thought to be on 2025.

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NZDUSD Outlook

NZDUSD hit a 4-month high following RBNZ Governor Orr’s statement earlier. However, a look at the weekly chart suggests that any upward movement could be limited by the confluence of resistance around 0.6540.

For one, this price falls nicely with the falling trend line from connecting the highs of April 8, 2018, March 17, 2019, and July 14, 2019. This area also coincides nicely with the 61.8% Fib level (if you draw from the high of July 21 to the low of September 29). Lastly, this also a previous support level from October 7, 2018 and July 9, 2019.

If resistance holds, NZDUSD could trade lower to its year-to-date lows around th2 0.6200 psychological handle. On the other hand, a close around 0.6585 could mean that the currency pair may soon trade higher to its July highs around 0.6785.Download our latest quarterly market outlook for our longer-term trade ideas.

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