Market Brief: Nikkei 225, Hang Seng and USDJPY UP on Trade Deal Hopes, Dovish BOJ

The rally across US equities markets spilled over into Asian markets today. The Nikkei 225 finished with a 0.28% gain at 23,437.77. Meanwhile, the Hang Seng index is slightly up around 42 points at 26,956.0.

As for currencies, USDJPY is trading above the 109.00 handle at 109.15, up 14 pips from its open price. NZDUSD is flat at 0.6427 while AUDUSD is marginally lower around 9 pips at 0.6777.

US stock indices got a boost to their record-highs in last night’s trading on optimism that a phase one US-China trade deal may be announced soon. US President Donald Trump said that, “We’re in the final throes of a very deal. I guess you could say one of the most important deals in trade ever.” His remarks confirmed earlier reports from China which said that both parties have reached a consensus in resolving issues.

Earlier today, economic data from China showed that industrial profits dropped by 9.9% from a year ago in October. The decline is the biggest one posted since 2011 and follows after the report also showed a contraction in September of 5.3%. This news, however, had very little effect in Asian stock markets.

Meanwhile, BOJ member Makoto Sakurai may have caused weakness in the Japanese yen in today’s Asian session. He said that the BOJ is committed to its inflation target and that they need to prepare for further easing in case of a recession.

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USDJPY Outlook

Weakness in the Japanese yen has pushed USDJPY back to the neckline resistance of the inverse head and shoulders on the daily chart. A bullish close above 109.46 where the currency pair hit highs on November 7 could mean that it may soon rally to 112.13 where the year-to-date highs are.

Conversely, a rejection at this level could send USDJPY below 109.00 again and test support at the rising trend line. A break of support around 108.80 could be the beginning of the pair’s move back down to support around 106.58.Download our latest quarterly market outlook for our longer-term trade ideas.

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