Market Brief: Nikkei 225, Hang Seng, and USDJPY in the Red on Risk Aversion

Asian equities markets closed lower today. The Nikkei 225 was down 244.6 points or 1.05% at 23,135.2. Meanwhile, the Hang Seng index is down 328.7 points or 1.25% at 26,062.6. As for USDJPY, it is trading roughly 15 pips lower from its open price around 108.45.

US President Trump Not in a Hurry to Pass Phase One Deal

Risk aversion dominated market sentiment as new developments in the US could ruffle China’s feathers. For one, US President Donald Trump has remarked yesterday that he is in no hurry to have a phase one deal passed anytime soon. He has been critical about negotiations. In fact, he has expressed concerns about the US getting the losing end of a deal.

Uighur Act of 2019 Condemned by China

On top of that, US Congress has just passed the Uighur Act of 2019. It aims to toughen its stance on Xinjiang where over a million Muslims (most of whom are Uighurs) are being held in re-education camps. The bill still needs to get passed in Senate before President Trump can veto or approve it. However, China’s foreign ministry has already condemned the move. They said that this is the country’s way to combat extremism and that the US should stop meddling with its domestic affairs.

US Reports Due Today

Today, a couple of high-impact economic reports are due for release from the US. At 1:15 pm GMT, the ADP non-farm employment change report for November is scheduled. The consensus is eyed at 137,000. Then at 3:00 pm GMT, the ISM non-manufacturing PMI report is estimated to come in at 54.5. A positive reading would be bullish for the dollar and US equities markets because it could help affirm the Federal Reserve’s optimism on the economy.

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USDJPY Outlook

On the weekly chart, we can see that resistance on the falling trend line held (from connecting the highs of September 30, 2018, November 25, 2018, and April 14, 2019).

USDJPY weekly chart

USDJPY weekly

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A closer look at the 4-hour chart shows that support on the rising trend line (from connecting the lows of November 1 and November 21) has been broken. In fact, it looks like USDJPY has formed a bearish flag and price is already trading below consolidation. The nearest support level is at 108.27 where the currency pair hit lows on November. If that does not hold, the next support level to watch out for is 107.89 where USDJPY hit support on October.

On the other hand, a close above 108.70 could mean that buyers are back in control and that the currency pair may soon rally to 109.68.

USDJPY 4-hour chart

USDJPY H4
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