Asian Stocks Talking Points:

  • Most Asian shares recover as trade war worries settled down, anti-risk Yen fell
  • Next, markets eye a central bank panel with commentary from important officials
  • ASX 200 is testing a breakout, opening the door to a resumption of its uptrend

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As expected, Asian shares took a breather from yesterday’s aggressive selloff which was sparked by increased trade tensions between the US and China. A lack of updates as traders await further escalation allowed some stock markets to consolidate.

BACKGROUND: A Brief History of Trade Wars, 1900-Present

In Japan, the Nikkei 225 rose more than 0.30 percent by Wednesday afternoon trade. Most of the gains were from the telecommunication services and health care sectors. Chinese shares were held down though with the Shanghai Composite falling about 0.60 percent. Australia’s ASX 200 climbed, pushed higher by financials and information technology. The KOSPI pulled ahead, rising more than one percent.

On the FX side of things, the lull in trade war rhetoric diminished demand for safe havens. The anti-risk Japanese Yen was cautiously lower while the sentiment-linked Australian and New Zealand Dollars appreciated.

From here, aside from updates on tariff retaliations, all eyes will be on a central bank policy panel that takes place in Sintra, Portugal. We will get commentary from Fed’s Jerome Powell, ECB’s Mario Draghi, RBA’s Philip Lowe and BoJ’s Haruhiko Kuroda.

Amidst last week’s monetary policy announcements from the Fed and ECB, speeches from Mr. Powell and Mr. Draghi can arguably have more potential for FX volatility. If the Fed Chair reiterates last week’s hawkish tone while the ECB President sticks to a more dovish one, then we may see some US Dollar gains at the expense of its European counterpart.

ASX 200 Technical Analysis: More Gains Ahead?

On a daily chart, Australia’s ASX 200 was stuck right below immediate horizontal resistance levels as of Tuesday’s close. These are a combination of the January, May and current June highs between 6,158 and 6,149. However, as of today’s cooldown in trade war fears, the index is attempting a push to the upside for a new 2018 high.

This opens the door to more gains in the coming days as the ASX 200 resumes its uptrend from early April. From here, a push above resistance exposes the 50 percent midpoint of the Fibonacci extension at 6,202 followed by the 61.8% level at 6,264. On the other hand, a turn below if resistance holds places the 23.6% extension as the first target at 6,064. Under that, the index faces a near-term rising support channel going back to late-May.

ASX 200 Daily Chart: Breakout on Ebbing Trade War Worries?

ASX 200 and other equities Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter