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ASX 200 Faces Resistance at 6100, Nikkei 225 Edging Higher

ASX 200 Faces Resistance at 6100, Nikkei 225 Edging Higher

Margaret Yang, CFA, Strategist

ASX 200, NIKKEI 225, HANG SENG INDEX OUTLOOK:

  • ASX 200 index edged up after a strong US session, facing strong resistance at 6,100 ahead
  • Nikkei 225 index climbed in early hours, which may lead Asia higher
  • Hang Seng Index held above 25,000 support, which remains a critical level

ASX 200 Outlook:

Australia’s ASX 200 (ASX) index stock market benchmark may climb on Tuesday, according to the futures market. As strong rally in US technology stocks overnight underpinned market confidence, sending index futures prices higher across the Asia-Pacific region.

As the ASX 200 index lingered around a key resistance zone in the 6,000 – 6,100 area, growing Covid-19 concerns may serve to cool down risk appetite in the short term. Victoria had 275 new cases and one death, and NSW added 20 new cases. This points to perhaps tighter border control and stricter social distancing measures in the weeks to come, which is unfriendly to an economic recovery.

Sector-wise, information technology and materials were doing the heavy lifting whereas the other nine sectors fell on Monday. Energy (-2.62%), communication services (-1.52%), industrials (-1.18%) and consumer discretionary (-1.12%) were among the hardest hit.

ASX 200 Sector performance20-7-2020

ASX 200 Faces Resistance at 6100, Nikkei 225 Edging Higher

Technically, the ASX 200 index faces strong resistance level at 6,100 – a 61.8% Fibonacci retracement (chart below). As the index recovered from March’s lows, it has formed an ‘Ascending Triangle’ on its daily chart. The upper bound of the triangle coincides with the 61.8% Fibonacci retracement, reaffirming this critical resistance. The 20-Day, 50-Day and 100-Day Simple Moving Averages (SMAs) suggest the overall trend remains bullish.

ASX 200 IndexDaily Chart

ASX 200 Faces Resistance at 6100, Nikkei 225 Edging Higher

Nikkei 225 Index Outlook:

The Nikkei 225 index moved mildly higher on Tuesday, following a strong US trading session led by the technology sector. This helped to underpin market confidence amid rising virus resurgence concerns. A rally in Nikkei today is mainly driven by technology stocks, which are perceived to have higher earnings potential amid the pandemic.

Technically, the Nikkei 225 index has likely broken out above resistance at 22,760 and moved higher (chart below). To attempt higher highs, it needs to firmly break above the previous high seen in June – 23,300. An immediate support level could be found at 22,400 – the 50-Day SMA.

Nikkei 225 IndexDaily Chart

ASX 200 Faces Resistance at 6100, Nikkei 225 Edging Higher

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index (HIS) had a volatile session on Monday, making a ‘V-shaped’ rebound as the Shanghai Composite recovered from losses and ended 3% higher. Ping An Insurance (+1.71%) and China Life (+8.32%) were the biggest contributors to HSI’s rise yesterday whereas HSBC (-0.95%) weighed.

Technically, the Hang Seng Index has found support at 25,000 and moved higher to 25,260 – according to the futures markets. Holding above this level could pave way to attempt higher highs around the 26,000 – a 61.8% Fibonacci retracement level.

Hang Seng IndexDaily Chart

ASX 200 Faces Resistance at 6100, Nikkei 225 Edging Higher

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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

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