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Nikkei 225 Fluctuates With ASX 200 after Fed Sends Dovish Messages

Nikkei 225 Fluctuates With ASX 200 after Fed Sends Dovish Messages

Margaret Yang, CFA, Strategist

NIKKEI 225, ASX 200, CHINA A50 INDEX OUTLOOK:

  • Nikkei 225 index rose in early hours to 22,450, leading Asia Pacific stocks modestly higher
  • ASX 200 index may rise after a dovish Fed statement, facing key resistance at 6,100 ahead
  • FTSE China A50 index may rise alongside broader Asia Pacific markets

Nikkei 225 Index Outlook:

The Nikkei 225 index opened mildly higher on Thursday but failed to maintain its upward momentum. This came in contrast to an upbeat US trading session as the Fed signaled more stimulus in its FOMC meeting. The central bank has pledged to ‘support the flow of credit to households and businesses… increase its holdings of Treasury securities and commercial mortgage-backed securities…’ in its policy statement. This suggests that liquidity will likely remain ample in the foreseeable future, creating a friendly environment for equities and risk assets.

Technically, the Nikkei 225 index failed to break a key resistance level at 22,800 – which is the upper bound of the rectangle shown in the chart below. The index subsequently entered into consolidation between a tight range of 22,300 – 22,800.

Nikkei 225 IndexDaily Chart

Nikkei 225 Fluctuates With ASX 200 after Fed Sends Dovish Messages

ASX 200 Outlook:

Australia’s ASX 200 (ASX) index stock market benchmark opened mildly higher on Thursday, following the US markets higher. The plunge in the US Dollar has sent the Australian Dollar higher to its 15-month high at 0.7175. A stronger currency may serve to inhibit Australia’s the stock market as a more expensive currency could depress demand for exports. 6,100 remains a key resistance level ahead.

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 IndexDaily Chart

Nikkei 225 Fluctuates With ASX 200 after Fed Sends Dovish Messages

FTSE China A50 Index Outlook:

The FTSE China A50 stock benchmark is consolidating this morning, following a 2.5% rally on Wednesday. The Shanghai Composite is also oscillating between gains and losses today after yesterday’s 2% jump. Technically, the A50 index seems to have found a strong support at 14,800 and is attempting a rebound. An immediate resistance level can be found at 15,430 – the 23.6% Fibonacci retracement. Breaking above this level could open room for more upside towards the 16,650.

FTSE China A50 IndexDaily Chart

Nikkei 225 Fluctuates With ASX 200 after Fed Sends Dovish Messages

--- 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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