Market Brief: Nikkei 225, Hang Seng, ASX Buoyed by Positive Trade Talks Between the US and China

The Nikkei 225, Hang Seng Index, and ASX are all trading higher today on news that the US and China are still on good terms. As of this writing, the Nikkei 225 is up by over 2.40% at 20,150.00. The Hang Seng Index is in the green by 0.96% at 24,210.09. Meanwhile, the Australian Stock Index is positive by 1.33% at 82.04.

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NAS100

NAS100 (11294)

Not in Sell Zone

STOP

SELL

TP1

11182

TP2

11000

Yesterday, there were reports that the US is looking for ways to implement sanctions against China for the coronavirus pandemic. Consequently, this raised concerns about the trade deal which had been going smoothly before pandemic crippled the global economy. 

However, this morning, Reuters reported that trade representatives from both countries spoke on the phone. US and Chinese policymakers supposedly agreed to follow through with the Phase One agreement which was agreed on in early 2020.

Currencies also seemed to benefit from this positive development too. AUDUSD, known to be a barometer for risk, is leading gains in today’s Asian session despite a pessimistic forecast from the RBA. NZDUSD and GBPUSD are also trading in the green.

It could also be that market participants are reducing their long-USD positions ahead of the US NFP report later. Following the ADP Employment Report earlier this week, investors are bracing for another huge drop in jobs for April. The forecast is at -22 million with the unemployment seen to rise from 4.4% to 16%.

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USDJPY Outlook

On the 1-hour time frame, it can be seen that USDJPY is trading within a descending channel. As of this writing, it has retraced some of its losses to the 23.6% Fib level (when drawing from the high of April 30 to the low of May 6). If there are enough buyers in the market, USDJPY could make a run for its near-term resistance around 106.90. This price coincides with the top of the channel, the 100 SMA, and the 61.8% Fib level. If there is enough bullish momentum, it could even rally to 107.85 where it could test the 200 SMA and the highs for April 23.

On the other hand, if sellers dominate trading, USDJPY could fall back to the bottom of the channel at 105.85. 

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