Asia Pacific Market Wrap – China Inflation, Trade Talks, ASX 200, Japanese Yen, Fed
- Asia Pacific stocks trade mixed, not impressed by lack of clear details on US China trade talks
- Slowing Chinese inflation reinforced fears of economic weakness, anti-risk Japanese Yen rose
- ASX 200 attempting reversal of dominant downtrend, all eyes on commentary from Fed Chair
See our study on the history of trade wars to learn how it might influence financial markets!
Asia Pacific benchmark stock indexes traded rather mixed, failing to fully capitalize after another rosy day on Wall Street given a dovish Fed updates. This may have been as a result of a lack of concrete details on the outcome of US China trade talks after being extended into a third day. Arguably, the markets bought into rumors last week that a positive outcome would be reached. They might end up having to sell the news.
The most that we got was comments from Chinese officials that described the talks as ‘broad, deep and detailed’. It also did not help that Chinese measures of inflation slowed, signaling further weakness in the economy. Heading into the close, the Nikkei 225 was down about 1.32% after failing to break above resistance earlier in the week. Australia’s ASX 200 traded rather mixed.
Given the slight dose of risk aversion, the Japanese Yen edged cautiously higher against its major counterparts. Meanwhile the Canadian Dollar head a little bit lower, perhaps reflecting traders taking partial profits given pronounced gains as of late. The pro-risk New Zealand Dollar succumbed to partial selling pressure as well.
Looking ahead, S&P 500 futures are pointing lower which may lead to losses in European and US stocks as trade optimism falls apart. We do have a speech from Fed Chair Jerome Powell and at this point, there is less room for further disappointment in hawkish bets. This arguably leaves risks tilted to the upside if he reinforces the need to raise rates perhaps twice this year. Still a distant fetch for what the markets expect.
ASX 200 Technical Analysis
Things are looking really interesting for ASX 200 bulls. On the daily chart below, the index appears to be following-through on a bullish Inverse Head and Shoulders candlestick formation. If it completes the close above the descending resistance line from September, it may very well reach the target of the pattern which is around 5,942. You may follow me on twitter @ddubrovskyFX for more immediate updates on the index.
ASX 200 Daily Chart
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