Stock indices traded lower today as risk aversion weighed down market sentiment. The Nikkei 225 closed 28.6 points or 0.12% lower at 23,409.1. Hong Kong stocks also slipped with the Hang Seng index down around 37 points or 0.14% at 26,915.0. USDJPY also traded lower to 109.32 today before steadying at 109.45.
The biggest forex news in today’s Asian session is that US President Donald Trump signed the HK rights bill into law. It aims to protect human rights in the city state of Hong Kong and is seen as a move against the Chinese government. China has previously condemned the bill and warned that it could retaliate by imposing tariffs on US-imported goods. There are now speculations that this move by the US could keep the negotiators from finalizing part of their trade deal this year.
While this news isn’t new, it sparked a bit of risk aversion because recent gains across equities markets were fueled by optimism that the US and China would soon ink an agreement.
The positive US GDP report yesterday helped fuel a rally on USDJPY to push it to the neckline resistance of the inverse head and shoulders around 109.60. If there are enough buyers in today’s market, support at the 50% Fib level (drawing from yesterday’s low to yesterday’s high) could hold. We could soon see a rally past 109.60 and the currency pair could be on its way to test its May 21 highs at 110.65.
On the other hand, a break below the 50% Fib could push USDJPY down to support around 109.05.Download our latest quarterly market outlook for our longer-term trade ideas.