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Market Brief: Asian Equities Mixed. Was Yesterday’s Reaction to Coronavirus Fears Exaggerated?

Nikkei 225 Ends Higher
Nikkei 225 Ends Higher

Asian equities markets were mixed in today’s trading. While the Japanese and mainland Chinese stocks traded lower, Hong Kong markets look to have stabilized.

The Nikkei 225 incurred a 3.34% loss today as it closed at 22,605.4 after taking a break for a national holiday yesterday. The Shanghai Composite Index extended its losses, also finishing lower by 0.60% at 3,013.050. Today’s losses can once again be attributed to risk aversion lingering in the markets brought about by concerns about the coronavirus outbreak. Over the weekend, G20 leaders expressed their worries about the infection’s toll on the global economy. Meanwhile, South Korea and Italy reported a surge in cases within their respective countries

On the other hand, the Hang Seng Index is trading higher by 47.7 points or 0.17% at 26,860.6. Some analysts say that the reaction across equities markets may have been exaggerated yesterday. The Hang Seng’s performance today supports this assumption. If this turns out to be true, it should not take long for the Nikkei 225 and other equity markets to trade in the green.

Meanwhile, it has been a quiet start to the major currencies today. All of them are trading within 0.10% of their opening price. On the other hand, gold and silver prices saw some volatility earlier as they abruptly traded lower on profit-taking.

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USDJPY Outlook

On the 4-hour time frame, we can see that USDJPY has recouped most of its gains back to the 61.8% Fib level (drawing the Fibonacci retracement tool from the low of February 18 to the high of February 20). However, connecting the lows of January 31 and February 18, we can see that the currency pair still has some room to trade lower and still maintain its uptrend. There seems to be a confluence of support around 110.35 where the rising trend line and SMAs (100 and 200) seem to coincide. Reversal candles around this level could mean that USDJPY may soon rally above 112.00. On the other hand, a strong bearish close below the trend line may mean that the currency pair could fall to support around 109.60.