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Nikkei 225, Hang Seng Defensive Before Powell Speech. Nifty 50 Up

Nikkei 225, Hang Seng Defensive Before Powell Speech. Nifty 50 Up

Margaret Yang, CFA, Strategist

NIKKEI 225, HANG SENG, NIFTY 50 INDEX OUTLOOK:

  • The Nikkei 225 index may rise on strong US leads, testing a resistance at 23,300
  • The Hang Seng index is flat pre-market, in a defensive mode
  • India’s Nifty 50 index continues to defy gravity and may aim at higher levels

Nikkei 225 Index Outlook:

Japan’s Nikkei 225 index stock market is set to open higher on Thursday, following another strong US trading session. The Nasdaq 100 jumped 1.7% and S&P 500 advanced 1%, both reaching their fresh records led by a massive tech rally. This ‘Tech Fever” showed no sign of ending thus far, but the fact that the majority (56%) of the S&P 500 components failed to join the party may warrant a bit of caution.

Fed Chairman JeromePowell’s speech tonight will be in the spotlight, as traders around the globe are eyeing the monetary policy guidance in light of recent changes in the inflation and job market outlook. Theoretically, a dovish-biased statement is likely to weaken the USD, and propel stocks. A hawkish-biased statement is likely to deliver the reverse.

In the Asia-Pacific region, investors are perhaps increasingly skeptical about the tech-driven index rally and its sustainability. A handful of major indices in the region - the Nikkei 225, the Hang Seng, the Straits Times and ASX 200 - failed to catch up with their US peers this month. They are in a defensive mode ahead of Powell’s speech.

Sector-wise in the Nikkei 225, communication services (+1.80%), energy (+0.18%) and financials (+0.09%) were doing the heavy lifting, whereas real estate (-1.5%), utilities (-1.16%) and consumer staples (-0.47%) were lagging.

Nikkei 225 Index Sector performance 26-8-2020

Nikkei 225, Hang Seng Defensive Before Powell Speech. Nifty 50 Up

Source: Bloomberg, DailyFX

Technically, the Nikkei 225 is challenging key resistance at 23,300 – the previous high seen in early June 2020. Breaking through this level will likely open the room for more upside towards 24,000 – a key psychological resistance. The overall trend remains bullish as suggested by its 20-, 50- and 100-Day Simple Moving Averages (SMAs)

Nikkei 225 IndexDaily Chart

Nikkei 225, Hang Seng Defensive Before Powell Speech. Nifty 50 Up

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index stock benchmark is set to open marginally higher on Thursday, according to the futures market. This is in spite of a strong rally in Wall Street firms overnight. The Hang Seng index is outshined by a tech rally in the non-index components such as Alibaba, Xiaomi, Meituan and JD.com, which have far outperformed the broad market.

Technically, the index is facing a strong resistance level at 25,550 – the 5% Fibonacci retracement. Breaking above this level would likely open room for more upside towards 25,860 – the 61.8% Fibonacci retracement.

Hang Seng Index Daily Chart

Nikkei 225, Hang Seng Defensive Before Powell Speech. Nifty 50 Up

Nifty 50 Index Outlook:

India’s Nifty 50 index is riding an ascending trend as highlighted in the chart below. Its 20-, 50- and 100-Day SMAs are trending up nicely, suggesting the upward trajectory remains intact. An immediate resistance can be found at a psychological level of 12,000, and then 12,220. The momentum indicator, MACD, however, has shown signs of weakness as it seems to have drifted lower towards the centerline.

Nifty 50 Index Daily Chart

Nikkei 225, Hang Seng Defensive Before Powell Speech. Nifty 50 Up

--- 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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