Asia Day Ahead: US dollar on bid, Nikkei remains in rising wedge
Risk sentiments will have the late-night bump in the US dollar to react to, thanks to less dovish Federal Reserve (Fed) Chair Jerome Powell’s comments.
Asia Open
The Asian session looks set for a slightly mixed open in today’s session, with Nikkei +0.98%, ASX +0.50% and KOSPI -0.48%. Risk sentiments will have the late-night bump in the US dollar to react to, thanks to less dovish Federal Reserve (Fed) Chair Jerome Powell’s comments, which seem to set the stage for a potential rate hold ahead. Above-target inflation and a resilient labour market were highlighted as the basis for more patience, and while market participants were somewhat prepared for that, hearing it from the Fed Chair right now seems to suggest that a pause in rate cuts may come earlier than before.
Based on the CME FedWatch, the rates market has seen the odds of a 25 basis point (bp) rate cut in December ease to 50% from previous 80%. If anything, the higher-than-expected US producer price index (PPI) reinforces the fact that the “last mile” inflation fight will be an arduous one. Given previous history of positive Wall Street performance during periods of rate hold, any jitters over a less dovish Fed ahead may offer buy-the-dip opportunities. The greater risks may come from a Fed’s reversion to rate hikes, which will then sound bigger alarms over inflation, but that is not the base case at least for now.
Chinese equities continue to see some shunning, with the Nasdaq Golden Dragon China Index (-1.8%) down for its third straight day. Disappointing revenue from JD.com revealed that China’s economic challenges are far from over, with consumer demand remaining soft and raising questions about the effectiveness of China’s recent stimulus.
A series of economic data out of China will be in focus today, including retail sales, industrial production and fixed asset investment. Expectations are for conditions to improve, with retail sales heading to 3.8% from 3.2% prior, while industrial production and fixed asset investment may see an improvement of 0.1%. Any upside surprise may help to offer a short-term bump in the markets, but we remain cautious of any fading in the rally, without a sizeable fiscal injection for its economy and knotty geopolitical ties with the US.
Technical analysis: Nikkei 225 remains in its broader rising wedge
The Nikkei 225 index continues to trade within a rising wedge pattern for now, with the formation of higher lows suggesting buyers in broad control. The 38,320 level at the lower wedge trendline may be a crucial support to hold, while on the upside, buyers may look to retest the 40,200 level next, followed by the 41,000, where the wedge resistance stands.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
