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Market Brief: Asian Stocks Score Gains as Sentiment Improves; Risk Currencies Mixed

Nikkei 225 m
Nikkei 225

PBOC Easing Alleviates Coronavirus Concerns

Asian equities markets are trading higher today as market sentiment improved. The Nikkei 225 closed higher for a third consecutive day. It was up 235 points or 1.02% at 23,319.6. Meanwhile, the Hang Seng Index is up close to 100 points or 0.38% at 26,772.2. The Shanghai Composite Index is also up by 1.25% or 34.800 points at 2,818.088.

Fears surrounding the coronavirus seem to have eased. While the number of confirmed cases has risen to over 24,500 and the death toll is up at 493, investors found comfort in China’s commitment to support its economy. The rapid spread of the virus has led to a handful of companies suspending work. Consequently, business disruptions are seen to adversely affect the Chinese economy. In response, the PBOC injected 170 billion USD-worth of cash into the economy and cut rates by 10 basis points.

Risk Currencies Mixed on RBA, NZ Report; MAS Hints at Further Easing

Despite the market’s improved sentiment, risk currencies are mixed in today’s trading. AUDUSD is trading higher by 0.02% following RBA Governor Lowe’s remarks earlier. In a statement, he said that the central bank is not too keen on easing for as long as inflation and unemployment meet their projections. Meanwhile, NZDUSD is down by 0.12% following last night’s mixed labor figures from New Zealand. USDJPY is also in the red by 0.17% amid a quiet Asian session. Meanwhile, USDSGD surged over 100 pips following dovish remarks from MAS.

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USDJPY Outlook

On the daily time frame, we can see that support at the 100 SMA and 200 SMA held perfectly. USDJPY is now testing resistance at its November and December highs around 109.30.

A closer look at the 1-hour time frame shows that the currency pair has been consolidating after its strong bullish run. Consequently, this has allowed for a bullish flag chart pattern to form. In forex trading, this is considered as a bullish continuation signal. This means that a close above yesterday’s highs at 109.53 could mean that USDJPY may be on its way to its January highs at 110.27.

On the other hand, if the bullish rally runs out of steam it could trade lower. There is near-term support around 109.20 where USDJPY established highs last week. This price also coincides with the 38.2% Fib level when you draw the Fibonacci retracement tool from yesterday’s low to its intraday swing high. If support at this price does not hold, we could see USDJPY trade even lower to 108.90. This price also offers a confluence of support. For one, it coincides with a rising trend line from connecting the lows of January 31 and February 3. It is also the 61.8% Fib level.