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Dow Jones Regains Strength as Safe Havens fall, Hang Seng Index Fluctuates

Dow Jones Regains Strength as Safe Havens fall, Hang Seng Index Fluctuates

Margaret Yang, CFA, Strategist

DOW JONES, HANG SENG INDEX OUTLOOK:

  • Dow futures extended gains after surging 1.91% on Wednesday, all 30 index components climbed
  • Hang Seng Index (HIS) fluctuates at open, as a US crackdown on Ant Financial may weigh on tech sentiment
  • Vice presidential debate and initial weekly jobless claims data are in focus
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Dow Jones Industrial Average Index Outlook:

US equity index futures extended gains at Asia open after erasing all losses since President Trump abruptly called to end US stimulus talks. He has since proposed piecemeal fiscal aids for airline and small businesses. Dow Jones, S&P 500 and Nasdaq surged 1.91%, 1.74% and 1.88% respectively.

The US Dollar Index (DXY) fell alongside Treasury bond prices, suggesting that near-term risk appetite has swung to the positive side. But this ‘risk on’ mood may not last, given what has just happened in the past week. The roadmap to the US election is likely to remain bumpy and full of surprises.

Democratic presidential candidate Joe Biden has urged Trump not to debate if he is still positive for Covid for the second debate. This renders today’s vice presidential debate between Republican nominee Mike Pence and Democratic candidate Kamala Harris even more appealing to voters and global investors.

Asia-Pacific markets may follow US leads higher, as the futures market suggests. Tonight’s US weekly jobless claims data is among key market events besides the vice presidential debate. Economists anticipate 0.82 million unemployment claims this week (chart below), a relatively small improvement from the previous week. Read more on our economic calendar.

Dow Jones Regains Strength as Safe Havens fall, Hang Seng Index Fluctuates

Source: Bloomberg, DailyFX

Sector-wise, all nine Dow Jones sectors closed in the green, with 100% of the constituent companies ending higher. A clear ‘risk-on’ pattern was observed in the US session, led by industrials (+2.69%), information technology (+2.23%) and energy (+2.05%).

Dow Jones Sector Performance 7-10-2020

Dow Jones Regains Strength as Safe Havens fall, Hang Seng Index Fluctuates

Source: Bloomberg, DailyFX

Technically, the Dow Jones is attempting to challenge an immediate resistance level at 28,330 – where it failed to break through on September 17th and since reversed lower. The index edged up within its upper Bollinger Band, suggesting that near-term trend appears bullish-biased.

The MACD indicator is expanding further into the positive territory, pointing to strong upward momentum. Clearing the 18,330 resistance is likely to open room for more upside towards a major resistance level at 29,000.

Dow Jones IndexDaily Chart

Dow Jones Regains Strength as Safe Havens fall, Hang Seng Index Fluctuates

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index (HSI) opened mildly lower, weighed by a potential US crackdown on Ant Financial and Tencent's payment services. Mainland Chinese stock exchanges will resume trading on October 9th when the National Day holiday comes to an end. Mainland stock markets may see a catch-up rally tomorrow, in the form of China A50 index futures.

Technically, the HSI extended gains after forming a bullish “AB=CD” pattern (chart below). A Fibonacci retracement (refer to chart below) highlights its possible path to recovery from the consolidation phase. Immediate resistance levels can be found at 24,160 (61.8%) and 24,440 (78.6%). The MACD indicator has formed a “golden cross”, which suggests more upside potential in the near term.

Hang Seng Index Daily Chart

Dow Jones Regains Strength as Safe Havens fall, Hang Seng Index Fluctuates

--- 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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