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ASX 200 Seeks Bullish Confirmation Ahead of US Midterm Elections

ASX 200 Seeks Bullish Confirmation Ahead of US Midterm Elections

2018-11-06 06:00:00
Daniel Dubrovsky, Analyst
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Asia Pacific Market Wrap – Nikkei 225, Philippine CPI, USD/PHP, ASX 200

  • Asia Pacific benchmark indexes trade mixed ahead of 2018 US midterm elections
  • Quiet session allowed Philippine Peso to gain ground on domestic inflation data
  • ASX 200 is attempting to confirm an ascent above a near-term falling trend line

We released our 4Q forecasts for equities in the DailyFX Trading Guides page

Asia Pacific benchmark indexes generally traded rather mixed ahead of US citizens going to the polls for the 2018 midterm elections. Some of the outperformers were in Japan where the Nikkei 225 rallied over one percent heading into Tuesday’s close. The index was bolstered by Toyota Motor Corp. which increased their profit outlook to 2.40T Yen this year from 2.30T.

Australia’s ASX 200 also rallied about one percent, pushed higher by financials which do carry the largest weight in the index (~32.43%). Most of the gains in the ASX were thanks to shares in the Commonwealth Bank of Australia rising about 1.4%. Meanwhile Chinese equities underperformed as investors are overshadowed by conflicting messages from the White House in regards to US China trade talks.

Foreign exchange markets were particularly quiet as traders await the outcome of the US midterms. The British Pound trimmed some gains following the latest Brexit headlines surrounding the highly debated Irish border solution. Meanwhile the Australian Dollar largely brushed off another rather status quo RBA monetary policy announcement as the central bank still remains patient before raising rates.

This subdued trading did allow for headlines out of the Philippines to bolster its local currency. The Philippine Peso gained ground against the US Dollar as expected following a higher-than-expect CPI report. In October, Philippine headline inflation clocked in at 6.7% y/y versus 6.6% expected which was the same pace as in September. USD/PHP declined, confirming recent bearish price signals.

Looking ahead, the US Dollar and local stock indexes may experience relatively quiet sessions as we await the results of domestic elections. Not surprisingly, S&P 500 futures are little changed heading into European trading hours. Outside of political event risk from the world’s largest economy, the Euro and DAX could be vulnerable to Italian budget concerns. This leaves EUR/GBP open to completing a bearish reversal pattern.

ASX 200 Technical Analysis

On a daily chart, the ASX 200 is attempting a push higher following a break above a near-term descending resistance line from October. This exposed the 38.2% Fibonacci retracement around 5,910 before targeting mid-October highs around 5,942. A turn lower on the other hand leaves 5,795 as near-term support (February 2018 lows) before opening the door to test 5,724 (April 2018 lows) thereafter.

ASX 200 Daily Chart

ASX 200 Seeks Bullish Confirmation Ahead of US Midterm Elections

Chart created in TradingView

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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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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