Nikkei 225 Rallies with Nintendo Stock, S&P 500 Momentum Fading?

Asia Pacific Markets Talking Points

• Nikkei 225 higher, Nintendo shares supported by Switch Lite announcement
• Dovish Powell, FOMC minutes kept sinking the US Dollar as stocks gained
• S&P 500 upside momentum fading before US CPI and Fed Chair testimony

Find out what retail traders’ equities buy and sell decisions say about the coming price trend!

Stocks

Equities traded higher during Thursday’s Asia Pacific trading session, building on the upside momentum from the prior Wall Street trading session. There, testimony from Fed Chair Jerome Powell and the latest FOMC meeting minutes reinforced the case for the first interest rate cut since 2008.

Prospects of cheaper credit conditions from the world’s largest economy helped send the Nikkei 225 0.4 percent to the upside. Japanese gaming giant Nintendo saw shares soar (+3.85%) in the aftermath of the company announcing an updated version of their latest portable console, the Switch Lite.

Elsewhere, Australia’s benchmark index, the ASX 200, climbed over 0.5 percent heading into the close. It was boosted by solid performance in materials (+0.8%). In China, the Shanghai Composite aimed more than 0.3 percent to the upside.

FX

At first glance, foreign exchange markets appeared to show signs of risk aversion as both the Japanese Yen and Swiss Franc rallied. The US Dollar understandably continued depreciating as the likelihood of lower rates works against its appeal from a yield perspective as traders lock in local government bond yields.

Yet, this could have been a balancing out of FX, via carry unwind, as investors rebalance their portfolios out of currencies and into increasingly-attractive stocks that are propped up by central bank easing bets. Anti-fiat gold prices, as a non-interest bearing asset, extended gains from the US trading session.

The Remaining 24 Hours

Mr Powell’s testimony to Congress continues into a second day as the next headline inflation data crosses the wires. Both risk sinking USD lower, for the time being, as markets anticipate a more-dovish Fed on increasingly-disappointing data.

Yet, the propensity for equities to continue rallying on relatively dismal conditions, especially as trade wars on other fronts (EU, India) heat up, could be running out. Do not discount what a premium for liquidity could do for the US Dollar.

S&P 500 Technical Analysis

S&P 500 futures are attempting to clear resistance at 3006, the record high set last week. However, the presence of negative RSI divergence shows fading momentum to the upside. At times, this can precede a turn lower or increase the chance of consolidation.

S&P 500 Futures Daily Chart

Charts Created in TradingView

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

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