Hang Seng Gains Before US-China Talks, Gold Prices Stabilize
HANG SENG INDEX, GOLD, CRUDE OIL PRICE OUTLOOK:
- Hong Kong’s Hang Seng index climbed a second day to 25,300, led by financial sector
- Gold prices attempted to stabilize around US$ 1,910 – the 61.8% Fibonacci retracement
- Crude oil prices advanced on vaccine hopes, improving data
Hang Seng Index Outlook:
Hong Kong’s Hang Seng Index stock benchmark advanced for a second day as financial stocks rallied. Sectoral rotation was clearly observed in the Hong Kong market these days, as investors switched out from technology stocks into banking names ahead of the review of the US-China phase one trade deal. As Tencent’s WeChat and other Chinese apps will likely be put on the table of these discussions, risk appetite is likely to remain weak until the political skies clear.
Tencent – the largest listed technology company in Hong Kong – has announced better-than-expected 2Q earnings after market close on Wednesday, bringing up hope of a stock price rally today. However, the upside is perhaps limited by a technical resistance at HK$ 560 and the risk of a potential US ban on WeChat.
Sector-wise, properties (+2.18%) was the best performing segment on Wednesday, while financials (+1.96%) contributed two thirds of the index’ gain. HSBC (+4.84%) and AIA (+3.03%) were the best performing index components.
Besides, Japan’s PPI and Australia’s jobs report are the key macroeconomic events on Thursday.
Hang Seng Index Sector performance 12-8-2020
Technically, the Hang Seng index has broken the ‘descending channel’ from the upside as shown in the chart below. It has since opened the room for more upside towards 25,200 and then 25,800 – the 50% and 38.2% Fibonacci retracements, respectively. Two bullish candle sticks formed this week showing strong upward momentum, which may drive the index higher towards 25,800 in the days to come.
Hang Seng Index – Daily Chart
Gold Price Outlook:
Gold prices stabilized at around US$ 1,910 following its biggest two-day selloff since 2013 on Wednesday. Favorable stock market sentiment and vaccine hopes are dampening the demand for safety, and thus may have catalyzed the selloff in gold and silver this week. Yields on the 10-year US treasuries rose to 66 bps – a one month high. Higher treasury yields reflect rising inflation prospects, which may lead to a more hawkish-biased Fed down the road. These are putting weight on anti-fiat precious metals too.
Technically, gold prices have reached the 76.4% Fibonacci retracement level at US$ 1,870 before bouncing back to US$ 1,943 – the 50% Fibonacci retracement. The price may start to stabilize between US$ 1,910 and US$ 1,942 today after two, extremely volatile trading sessions.
Gold Price – Daily Chart
Crude Oil Price Outlook:
Technically, the WTI crude oil prices have risen to a key resistance level at US$ 42.8 – the 61.8% Fibonacci retracement level. In the Fibonacci study, 61.8% is the so called ‘golden ratio’ and thus it usually serves as a key resistance or support level in trading. Breaking above this level will likely open up room for more upside towards US$ 48.5 and then US$ 51.7.
WTI Crude Oil Price – Daily Chart
--- 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.