Market Brief: Nikkei 225, Hang Seng, NZD, and AUD Up on Trade Deal and Brexit Optimism

Asian equities markets and risk currencies are in the green as risk appetite dominate this morning’s session. The Hang Seng index is up 572.7 points or 2.12% at 27,566.8 while the Nikkei 225 is up 617.4 points or 2.64% at 24,042.2. As for currencies, AUDUSD is up 15 pips at 0.6921 from its day open price. NZDUSD is trading above the 0.6600 psychological handle at 0.6617. USDJPY has reached an intraday high at 109.61 after opening at 109.27 today.

Hopes are High for a Trade Deal Announcement

Risk appetite was first triggered by US President Donald Trump during last night’s New York session. According to him, both China and the US want a trade deal to be finalized “badly.” There are also reports which say that an agreement could be announced as early as today, during the New York session. Market participants expect to hear a rollback in existing tariffs will be rolled back and new ones won’t be implemented, disregarding the December 15 deadline.

Conservatives’ Win Eliminate Brexit Uncertainty

It risk-on sentiment was fueled even further at the start of this morning’s session on news that Prime Minister Boris Johnson and the Conservatives have secured majority in the UK general elections. While official results aren’t out yet, the initial ones are enough to cement the Tories’ victory. This was positive for market sentiment because a Tory-led parliament suggests that a Brexit plan will soon be passed.

Economic Data from New Zealand and Japan

There were a few reports from New Zealand and Japan released last night and early morning today. However, market participants did not seem to mind the results.

Business NZ’s report on manufacturing showed that business activity in the sector could be slowing down. The reading for November was down to 51.4 from its October reading at 52.6.

Meanwhile, the Tankan Manufacturing Index report for Q4 2019 printed at is lowest reading in seven years at 0.0. It was estimated to come in at 3. On the other hand, the report for the services sector was better than expected at 20 versus the forecast at 16.

Lastly, Japan’s industrial production for November saw a downward revision at -4.5% to its initial forecast of -4.1%.

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NZDUSD Outlook

On the weekly chart, we can see that the currency pair is currently testing resistance at a falling trend line (connecting the highs of February 11, 2018, April 8, 2018, March 24, 2019, and July 21, 2019). If there are enough buyers in today’s trading and NZDUSD closes strongly above the trend line around 0.6670, it could be headed to 0.6930. This price level served as a previous resistance in December 2018 to January 2019. It also coincides nicely with a second falling trend line from connecting the highs of July 23, 2017, February 11, 2018, and April 8, 2018.

On the other hand, if NZDUSD fails to close above the trend line today, it could mean that sellers are priming to push the currency lower. Watch out for support around 0.6480 where NZDUSD previously made lows. If that level does not hold, the next support is at its year-to-date lows around the 0.6200 psychological handle.

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