Market Brief: Nikkei 225, Hang Seng Index Down on Iran’s Attacks; AUDUSD Holds on to Support

Summary:

While Asian equities markets like the Nikkei 225 and Hang Seng Index closed lower on news of Iran's retaliation, AUDUSD manages to hold on to support.

Risk Aversion Dominates Market Sentiment, Sparked by Iran’s Attack

After finishing yesterday’s trading in the green, Asian equities markets saw heavy selling in today’s trading as risk aversion once again dominated market sentiment. The Nikkei 225 finished today’s trading 371 points or 1.57% in the red at 23,204. The Shanghai Composite Index is still open and is trading 24.747 points or 1.13% lower at 3,069.116. Meanwhile, the Hang Seng Index is down by 336 points or 1.19% at 27,984.0.

The biggest news to hit headlines overnight was Iran’s attack on US military bases in Iraq. It is said that over a dozen ballistic missiles hit Ayn al-Assad and Erbil. There were also reports that a Ukranian Airlines passenger plane crashed after taking off shortly from Iran. While Iranian press reported that the crash was due to a technical malfunction, the news has raised speculations that it’s too much of a coincidence as it happened around the time of the attacks.

Of course, these recent developments caused market participants to be jittery. Demand for higher-yielding assets like equities have been dampened while safe haven assets like gold and the yen have become more appealing.

Risk Currencies Showing More Resilience

Currencies, however, are doing better than equities. Risk currencies like the Aussie and Kiwi are up roughly 0.05% from their opening prices today. AUDUSD and NZDUSD are trading at 0.6872, and 0.6645, respectively.

This could be because no official report on casualties have been released yet. While Iran reported that it took out 80 American “terrorists,” the US Pentagon has denied them. The agency said that no US personnel have died following its initial assessment. In fact, US President Donald Trump even tweeted that “all is well” despite the damages caused by the missiles.

AUDUSD Finds Bids After Positive Report

We also saw AUDUSD trade higher in today’s Asian session after the Australia’s Building Approvals report for November topped forecasts. It was reported that permits issued to new buildings rose by 11.8% during the month. This was more than five times what markets had expected with the forecast at 2.1%.

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AUD to USD Price Outlook

Remember the rising trend line I pointed out on AUDUSD yesterday? Support has already been broken after yesterday’s candle closed strongly below it. It may, however, provide AUDUSD with resistance. On the 4-hour time frame, we can see that the currency pair is currently finding support at the 200 SMA. A few reversal candles have already materialized which could hint that buyers are priming to push AUDUSD higher. The currency pair could find resistance at the previous trend line which also coincides with the 100 SMA at 0.6920. When you draw the Fibonacci retracement tool from the high of January 3 to today’s lows, you will also see that this price coincides with the 61.8% Fib level.

On the other hand, the recent string of candles can also be a sign that the market is taking a short pause before trading lower. A close below today’s Asian session lows may mean that AUDUSD is on its way to its December 18 lows at the 0.6800 handle.

Know more about the recent developments in US-Iran conflict and their effect on financial markets: