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S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony in Focus

S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony in Focus

Margaret Yang, CFA, Strategist

S&P 500, ASX 200, NIKKEI 225, ASIA-PACIFIC MARKET OUTLOOK:

  • S&P 500 index futures edged higher alongside Asia-Pacific equity indices after an extended holiday weekend in the US.
  • Janet Yellen’s Senate hearing is in focus today, followed by Joe Biden’s inauguration on Wednesday.
  • The US Dollar receded as markets anticipate a ‘hands-off’ approach from the new Treasury secretary.
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Yellen’s testimony, USD, Asia-Pacific Stocks Outlook:

Asia-Pacific markets look set to open broadly higher after a mixed trading session on Monday, as investors await Treasury Secretary nominee Janet Yellen’s Senate confirmation hearing later today. The former Federal Reserve Chair is likely to endorse a market-determined dollar value and make it clear that the US does not seek a weaker currency for competitive advantage, according to reports from WJS. Yellen’s comments may serve as a fresh catalyst for the Greenback, after it registered a 1.5% gain over the last two weeks. Ongoing QE and fresh fiscal stimulus hopes may reinforce the Greenback’s downward trajectory in the medium term. This morning, the DXY pulled back slightly from its one-month high, alleviating pressure on precious metals, crude oil and stocks.

DXY US Dollar Index

S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony in Focus

Chart by IG

Meanwhile, the Covid-19 pandemic continued to develop around the world, with global daily cases hitting 688,015 on 16th January. The rapid spread of new coronavirus strains and the follow-on tightening of restrictions may hint at a slower pace of recovery on Main Street. Especially for the tourism, restaurant, entertainment and transportation sectors.

Looking back to Monday, China Q4 GDP growth hit 6.5% YoY, beating market forecast of 6.1%. Industrial production expanded at a faster-than-expected pace of 7.3%, while retail sales growth registered a lower print of 4.6% in December. Markets responded very differently to Chinese data, with mainland’s CSI 300 index and the Hang Seng Index surging more than 1 percent while the rest of Asia-Pacific suffered a mild pullback. The Hong Kong-Shanghai stock connection registered a large amount of southbound inflow on Monday, reflecting strong appetite from mainland investors for Hong Kong stocks.

The ASX 200 index rebounded 0.93% on Tuesday morning, led by industrials (+1.24%), real estate (+1.14%), healthcare (+1.00%) and financials (+0.99%), while energy (-0.20%) trailed behind. Base metals prices including copper, nickel and iron ore advanced on a weaker US Dollar, but failed to lift the metal and material stocks. The Nikkei 225 index advanced nearly 1% at the open.

ASX 200 Top 10 Stocks Performance at Open 19-01-2021

S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony in Focus

Source: Bloomberg, DailyFX

Looking ahead, traders are facing a relatively quiet day in terms of macroeconomic data as the US market remains closed. Hong Kong’s unemployment rate, German inflation and Eurozone’s ZEW economic sentiment index are among the key events to watch for. Find out more on DailyFX calendar:

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S&P 500 Index Technical Analysis:

Technically, the S&P 500 index extended its upward trajectory within an “Ascending Channel” as highlighted in the chart below. The bull trend is well-supported by its 20-Day Simple Moving Average (SMA) line albeit the upper ceiling of the channel may serve as immediate resistance. Support and resistance levels can be found at 3,749 (61.8% Fibonacci extension) and 3,804 (76.4% Fibonacci extension) respectively.

S&P 500 IndexDaily Chart

S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony in Focus

ASX 200 Index Technical Analysis:

The ASX 200 index has been range-bound between 6,575 to 6,770 since late November, as highlighted in the chart below. The upper and lower bound may serve as an immediate resistance and support level respectively. MACD divergence and a narrowing Bollinger Band suggest that upward momentum may be faltering however. The index is also testing its 50-Day SMA, breaking below which may signal a deeper pullback..

ASX 200 Index Daily Chart

S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony in Focus

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index hit the 100% Fibonacci extension level of 28,770 and has retraced slightly since. The overall trend remains bullish as highlighted in the two “Ascending Channels” below. A widened Bollinger Band width reflects strong upward momentum, although a bearish MACD crossover may hint at short-term selling pressure. Immediate support and resistance levels can be found at 27,800 (76.4% Fibonacci extension) and 28,770 (100% Fibonacci extension) respectively.

Nikkei 225 Index Daily Chart

S&P 500, ASX 200, Nikkei 225 Rise on Weaker USD, Yellen's Testimony 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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