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Dow Jones Futures Climb With Nikkei 225 and Hang Seng, LDP Election in Focus

Dow Jones Futures Climb With Nikkei 225 and Hang Seng, LDP Election in Focus

Margaret Yang, CFA, Strategist

DOW JONES, NIKKEI 225, HANG SENG INDEX OUTLOOK:

  • Dow Jones futures climb 0.64% at Asia open, extending Friday’s gains. VIX falls
  • Japan’s Nikkei 225 index opens higher, attempting to break a resistance at 23,300
  • Hong Kong’s Hang Seng Index (HSI) may open higher alongside the broader markets

Dow Jones Index Outlook:

The Dow Jones Industrial Average (Dow) futures are climbing at early Asia hours, after rising 0.41% on Friday. Traders may ride the normal ebb and flow with a relatively quiet macro calendar today. This Wednesday’s FOMC meeting and Thursday’s BOJ and BoEinterest rate decisions are among the top events this week and thus will also be closely watched out.

Japan’s Liberal Democratic Party’s (LDP) election, which decides who will replace Prime Minister Shinzo Abe after his resignation, is held in Tokyo today. The chief cabinet secretary Yoshihide Suga, a candidate perceived as popular, is likely to keep Abe’s policy largely unchanged if elected. Any unexpected outcome, however, is likely to dampen risk appetite and spook the Japanese Yen.

The VIX volatility index has fallen for a fifth consecutive session to 30.99, suggesting that the recent technical pullback might be another healthy correction amid a mid-term bull run.

Sector-wise, industrials (+1.5%), financials (+0.84%) and consumer staples (+0.29%) were among the better performers on Friday, whereas energy (-0.59%) and information technology (-0.03%) were lagging behind.

Dow Jones Sector performance 10-9-2020

Dow Jones Futures Climb With Nikkei 225 and Hang Seng, LDP Election in Focus

Source: Bloomberg, DailyFX

Technically,the Dow has rebounded at the lower bound of its Bollinger Band (chart below). An immediate support level can be found at 27,500 – the 50-Day Simple Moving Average (SMA). Breaking this level will likely open the room for further downside towards the 23.6% Fibonacci retracement level at 26,600. An immediate resistance level can be found at 28,170 – the 20-Day SMA.

Dow Jones IndexDaily Chart

Dow Jones Futures Climb With Nikkei 225 and Hang Seng, LDP Election in Focus

Nikkei 225 Index Outlook:

Japan’s Nikkei 225 index has opened higher to start the trading week. Today’s LDP election will be closely watched by traders amid a seemingly low-volatility session. The USD/JPY was ranging between a narrow zone between 106.0-106.4 in the past few days, giving few clues to the equity traders.

Technically, the Nikkei 225 is attempting to break a key resistance level at 23,300 – the upper ceiling of its “Ascending Triangle” as shown in the chart below. A meaningful breakthrough will likely open room for further upside towards 24,000.

Nikkei 225 Index – Daily Chart

Dow Jones Futures Climb With Nikkei 225 and Hang Seng, LDP Election in Focus

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index (HSI) may open mildly higher alongside the broader Asia-Pacific markets as volatility index (VIX) continues to drift lower.

Technically, the HSI has broken down the upward trend as indicated in the chart below. It has since entered a bearish trend and has tested a key support level at 24,100 – the 38.2% Fibonacci retracement. The MACD indicator remains in a bearish setup and trends lower, suggesting more consolidation ahead before market reaches a real bottom.

Hang Seng Index Daily Chart

Dow Jones Futures Climb With Nikkei 225 and Hang Seng, LDP Election in Focus

--- 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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