ASX 200 Attempts 6100 as Mining Stocks Rise, Nikkei 225 Edging Higher

ASX 200, NIKKEI 225, STRAITS TIMES INDEX OUTLOOK:

• ASX 200 index may rise after a strong US session, facing key resistance at 6,100 ahead
• Nikkei 225 index climbed in early hours, which may lead Pacific stocks higher
• Straits Times index is consolidating at 2,500, waiting catalysts for a breakout

ASX 200 Outlook:

Australia’s ASX 200 (ASX) index stock market benchmark may open mildly higher on Tuesday, according to the futures market. As US technology stocks led a decent rebound in US local equity indices overnight, that may send 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, with Covid-19resurgence risks serving to contain risk appetite. A strong rally in gold prices this week so far propelled Australia’s mining sector, which gained 1.70% on Monday. Gold mining stocks jumped 4.27% on average.

Sector-wise, materials (+1.57%), consumer staples (+1.14%) and communication services (+1.14%) were outperforming, whereas utilities (-0.71%), healthcare (-0.51%) and energy (-0.37%) were lagging.

ASX 200 Sector performance27-7-2020

Source: Bloomberg, DailyFX

Technically, the ASX 200 index faces a strong resistance level at 6,100 – the 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 Index – Daily Chart

Nikkei 225 Index Outlook:

The Nikkei 225 index may open mildly higher on Tuesday, following a strong US trading session led by the technology sector. The upward momentum, however, is perhaps contained by persisting Covid-19 pandemic concerns and a stronger Japanese Yen. As the US Dollar Index fell to a two-year low, the Yen has strengthened to 105.3 – the highest level seen since March this year. A stronger currency is typically not favorable to Japan’s export and tourism sectors.

Technically, the Nikkei 225 index is attempting to break a key resistance level at 22,800 – which is the upper bound of the rectangle shown in the chart below. To attempt higher highs, it also 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 Index – Daily Chart

Straits Times Index Outlook:

Singapore’s Straits Times Index is consolidating at around 2,500 – 2,600 since last week, likely forming a ‘Double Bottom’ pattern in its daily chart. Second quarter earnings results has been mixed so far. Investors are waiting for results from major blue chip companies this week (chart below).

STI Earnings Calendar – week 27th-31st July

Source: Bloomberg, Dailyfx

Straits Times Index – Daily Chart

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

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