Asia Pacific Market Open Talking Points
- Latest US shutdown, trade war news bolsters market sentiment as S&P 500 clears resistance
- NZD/USD eyes RBNZ rate decision and Orr press conference after descent pauses on support
- Nikkei 225 may clear falling trend line from October, opening the door to extending gains next
See our study on the history of trade wars to learn how it might influence financial markets!
3 Things to Know Before Trading APAC Markets
1) Optimism Overwhelms Global Stock Indexes
As expected, the uptick in market mood from Tuesday’s Asia Pacific trading session echoed into European and US hours. Prospects of the US potentially averting going back into a government shutdown seemed to be the catalyst. A reduction in US-China trade war fears then added fuel to this as President Donald Trump hinted that he could be open to letting the March 1 deadline for Chinese tariffs to pass.
The S&P 500 had its best day since January 30, rising 1.29% as it took out February 5 highs in its uptrend from January. Looking at foreign exchange markets, the anti-risk Japanese Yen and Swiss Franc were some of the worst performing majors. Meanwhile, the US Dollar halted its 8-day winning streak, falling from waning haven demand as traders perhaps took profits ahead of tomorrow’s local CPI report.
2) The RBNZ Rate Decision is Due
The pro-risk Australian Dollar aimed higher but the same thing could not be said for the similarly-behaving New Zealand Dollar. This could be due to the upcoming RBNZ rate decision which could stir significant NZD/USD volatility. Not to mention that an hour after it, Governor Adrian Orr will be hosting a press conference. As such, perhaps traders erred on the side of caution in taking major bets in Kiwi Dollar.
The markets' RBNZ policy outlook has become increasingly dovish since its last interest rate announcement in November. This is generally following the trend of rising concerns from the major central banks (especially the Fed) about external headwinds such as slowing global growth and trade wars. For the Kiwi Dollar, its reaction will depend largely on how dovish the central bank will appear compared to market estimates.
3) Asia Pacific Equities
S&P 500 futures are pointing notably higher after Wall Street close, suggesting that the risk-on trading dynamic may continue. At the same time, the Nikkei 225 is sitting right on a falling trend line from October. Should the index close above 21,035 next and clear resistance, we may see gains from January extend which places the next potential barrier at 21,851 (August 13, 2018 low)
NZD/USD Technical Analysis
Ahead of the RBNZ rate decision, NZD/USD has stalled its descent above a range of horizontal support between 0.67141 and 0.66898. Continuation of market optimism may see the pair aim higher to 0.68439 while a more dovish RBNZ may place the rising trend line from October as an immediate area of support if the range is broken.
NZD/USD Daily Chart
Chart created In TradingView
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Asia Pacific Trading Session Economic Events
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter