Asia Day Ahead: China A50 reclaimed 200-day MA
The Asian session looks set for a mixed session, as many market participants may likely stay at the sidelines while awaiting further cues on US inflation progress ahead.
Asia Open
The Asian session looks set for a mixed session, with Nikkei -1.17%, ASX +0.21% and KOSPI +0.37% at the time of writing. Positive US equity futures may offer some slight relief from the lacklustre performance in Wall Street overnight, but many market participants may likely stay at the sidelines while awaiting further cues on US inflation progress ahead. The lead-up to the upcoming Bank of Japan (BoJ) has been casting more caution in the Nikkei lately, given that the resent string of economic data seems to validate expectations for a quicker policy pivot.
Following stronger wage growth for January and an evasion of technical recession in Japan’s economy, this morning’s data saw a higher-than-expected read out of its producer price index (PPI) data as well. Headline PPI rose 0.6% from the previous year, slightly above the 0.5% expected. Given the tendency for the pass-through in costs from producers to consumers, the stronger inflation read may raise the odds of the central bank attaining its ‘sustainable 2% inflation’ condition for an exit of its Negative Interest Rate Policy (NIRP).
Thus far, the odds of a policy move in the upcoming March meeting was seen as a coin flip (exactly 50-50 being priced), which suggests that either outcome from the BoJ meeting next week may likely trigger a huge wave of volatility for the JPY and the Nikkei.
What to watch: China A50 reclaimed 200-day MA
On another front, Chinese equities continue to diverge from the rest, with the Hang Seng Index (HSI) extending its gains for a third straight day. Perhaps one to note is that the China A50 has reclaimed its 200-day moving average (MA) for the first time since August 2023. The upward bias for the index remain intact for now, with the index trading above its daily Ichimoku cloud zone, alongside higher lows formed in its daily relative strength index (RSI).
Further upside may leave the 12,500 level on watch as the next resistance to overcome, while buyers will now be faced with the task of having to defend its 200-day MA to keep the upward trend intact. That leaves immediate trendline support at the 12,000 level.
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