Asian Stocks Talking Points:
- Asian shares lower following Wednesday’s Fed rate hike, Australian Dollar down
- Chinese data fell short, stocks and the Euro await the ECB rate decision ahead
- ASX 200 is testing short-term ascending channel support. Will it resume its decline?
Find out what retail traders’ Equities buy and sell decisions say about the coming price trend!
Asian shares were down and in the red by Thursday afternoon trade as expected, echoing declines from the US session. There, the Fed raised rates for a second time this year and signaled two more that are on their way by year end. Signs of tightening credit conditions from the world’s largest economy also has knock on effects for lending conditions around the globe. This bodes ill for economic growth and thus, hurts stocks.
Japan’s Nikkei 225 was down almost by a half of a percentage point. In China, the Shanghai Composite declined about 0.28 percent. Australia’s ASX 200 did not quite suffer as much, falling about 0.14 percent.
Things were the dimmest in South Korea, where the KOSPI declined about 1.57 percent. Comments from US Secretary of State Mike Pompeo seemed to have further dampened sentiment in the area.
Mr. Pompeo said that North Korean sanction relief won’t happen without denuclearization. This followed yesterday’s summit between US President Donald Trump and North Korea’s Leader Kim Jong-un. His comments seemed to run counter to the North’s suggestion that the United States would start easing penalties.
On the currency side of things, the Australian Dollar brushed off a rather disappointing local jobs report. The currency was quick to pare loses until a slew of worse-than-expected Chinese data crossed the wires, then it resumed its decline. In short, Chinese industrial production and retail sales clocked in at 6.8% and 8.5% y/y in May versus 7.0% and 9.6% estimated respectively. For full details, see the calendar below:
DailyFX Economic Calendar (All times listed in GMT)
Since China is Australia’s largest trading partner, economic performance in the former can have knock-on effects on the latter. This can in turn impact the path for monetary policy from the Reserve Bank of Australia, thus affecting the Aussie Dollar. Amidst the decline in stocks, the anti-risk Japanese Yen appreciated against its major counterparts.
From here, all eyes turn to Thursday’s European Central Bank rate decision. Here, there is scope for Euro losses as anticipation for a definitive taper to QE opens the door for disappointment to the contrary. In addition, signs that stimulus may stay for longer or even be reduced at a slower pace could have some room to bolster stocks unlike the Fed.
ASX 200 Technical Analysis: Heading Lower?
On a daily chart, the ASX 200 is right on the lower line of a short-term ascending channel. While there may be a breakout lower ahead, resumption of its descent seen in most of May would require some confirmation via daily closes lower. From here, a push lower exposes the 38.2% Fibonacci retracement at 5,951. On the other hand, an ascent places the 14.6% minor level at 6,075 as the next target.
ASX 200 Trading Resources:
— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
Slowing New Zealand GDP to Rattle Post-Fed NZD/USD Rally
Trading the News: New Zealand Gross Domestic Product (GDP)
Updates to New Zealand’s Gross Domestic Product (GDP) report may rattle the NZD/USD rally following the Federal Reserve meeting as the growth rate is expected to narrow to 2.5% from 2.6% per annum in the third-quarter of 2018.
Another downtick in the GDP print may produce headwinds for the New Zealand dollar as it warns of a slowing economy, and a dismal development may push the Reserve Bank of New Zealand (RBNZ) to alter the forward-guidance as the central bank warns ‘trading-partner growth is expected to further moderate in 2019.’
Even though the official cash rate (OCR) sits at the record-low of 1.75%, the weakening outlook for economic activity may encourage the RBNZ to further insulate the economy as the central bank asserts that ‘the direction of our next OCR move could be up or down.’ In turn, a GDP print of 2.5% or lower may spark a bearish reaction in NZD/USD, but a positive development may fuel the advance following the Federal Reserve meeting as it curbs bets for an RBNZ rate-cut. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.
Impact that the New Zealand GDP report has had on NZD/USD during the previous release
(1 Hour post event )
(End of Day post event)
12/19/2018 21:45:00 GMT
3Q 2018New Zealand Gross Domestic Product (GDP)
NZD/USD 15-Minute Chart
New Zealand’s Gross Domestic Product (GDP) report showed the growth rate increasing 2.6% after expanding a revised 3.2% in the second-quarter of 2018. A deeper look at the report showed Mining as the biggest contributor to growth as the sector grew 12.4% in the third-quarter, with Wholesale Trade climbing 1.1.% during the same period, while Utilities suffered a 2.3% decline after rising 4.1% during the three-months through June.
The New Zealand dollar struggled to hold its ground following the below-forecast print, with NZD/USD pulling back from the 0.6800 handle to close the day at 0.6774. Learn more with the DailyFX Advanced Guide for Trading the News.
NZD/USD Daily Chart
- Broader outlook for NZD/USD remains fairly constructive as both price and the Relative Strength Index (RSI) continue to track the upward trends from earlier this year, but the exchange rate may face range-bound conditions over the near-term as it appears to be stuck in a long-term wedge/triangle formation.
- With that said, the Fibonacci overlap around 0.6930 (23.6% expansion) to 0.6960 (38.2% retracement) sits on the radar as it lines up with the 2019-high (0.6942), with a break/close above the stated region raising the risk for a run at the December-high (0.6969).
- Next region of interest comes in around 0.6990 (50% expansion) following by the 0.7040 (50% retracement) zone, but failure to hold above the 0.6820 (23.6% retracement) to 0.6870 (78.6% expansion) area may trigger a move back towards 0.6780 (100% expansion) to 0.6790 (50% expansion).
Additional Trading Resources
New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide.
Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.
— Written by David Song, Currency Analyst
Follow me on Twitter at @DavidJSong.
Crude Rally Testing Critical Resistance Zone
In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Crude Oil prices have rallied nearly 10% from the yearly lows with the advance now testing a key technical resistance confluence around the 60-handle. These are the updated targets and invalidation levels that matter on the Crude Oil weekly price chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
New to Oil Trading? Get started with this Free How to Trade Crude Oil Beginners Guide
USD/CAD Weekly Price Chart
Notes: In last month’s Crude Oil Weekly Technical Outlook we noted that price was approaching 2018 pitchfork resistance with, “A topside breach of this formation / the high-day close at 57.14 targets more a more significant resistance confluence at 59.61-60.06 where the 50% retracement of the October decline and the 2018 open converge on the 2015/ 2016 pitchfork resistance- look for a larger reaction there IF reached.” Oil prices are testing this critical resistance confluence today on the back of a weak inventories report that showed a drop of more than 9.59mln barrels last week.
The focus is on a reaction off this threshold with the yearly advance at risk near-term while below. A weekly close above would be needed to suggest that a more meaningful low was registered in December with such a scenario targeting the 52-week moving average at ~62.82 and the 61.8% retracement of the 2018 decline at 63.68. Key support and bullish invalidation now rests back at 55.21/53– weakness beyond this threshold would risk substantial losses for crude prices.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: We’re looking for a reaction on this stretch into confluence resistance at 59.61 – 60.06. Watch the weekly close- below would highlight the threat for a near-term correction / exhaustion in price. From a trading standpoint, a good place to reduce long-exposure and raise protective stops. We’ll be looking for possible price exhaustion heading into next week IF crude prices respect this threshold into the close. I’ll publish an updated Crude Oil Technical Outlook once we get further clarity in near-term price action
Even the most seasoned traders need a reminder every now and then- Avoid these Mistakes in your trading
Crude Oil Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short Crude Oil – the ratio stands at -1.04 (49.1% of traders are long) – neutral reading
- Long positions are 4.2% lower than yesterday and 5.7% lower from last week
- Short positions are 8.2% lower than yesterday and 1.5% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil – US Crude prices may continue to rise. Yet traders are less net-short than yesterday but more net-short from last week and the combination of current positioning and recent changes gives us a further mixed Oil – US Crude trading bias from a sentiment standpoint.
See how shifts in Crude retail positioning are impacting trend- Learn more about sentiment!
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex
US Market Open: Top 3 Market Drivers
Market Themes and Movers – Brexit, FOMC and US-China Trade.
GBP: Another day of confusion and conflicting Brexit deal/delay talks continue to leave Sterling rudderless. Despite the current impasse the British Pound remains bid, although it is becoming increasingly vulnerable to short, sharp moves as news flows continue. The latest round of media reports suggest that PM May is looking for a three-month Brexit delay from EU negotiators although putting a revised meaningful vote to Parliament cannot be ruled out. UK inflation data released this morning showed little change and was put aside as traders focus on Brexit updates.
USD: The latest FOMC monetary policy decisionswill be released later in the UK session with monetary settings expected to be left unchanged. Traders will look for clues from Fed Chair Jerome Powell on the future path of interest rates, via the dot plot, and his latest thoughts on balance sheet normalization.
Gold/Oil: Both gold and oil are struggling to make further headway with one eye on the FOMC meeting and the other on the latest US-China trade negotiations with US President Donald Trump tweeting yesterday that talks were going ‘very well’. As with Brexit, the situation remains fluid with news flows again the dominant driver for trade war risk sentiment. With global growth falling, any positive trade news should underpin oil at its present level and may well give it a further leg-up in the short- to medium-term.
Chart of the Day – US Dollar Basket – Over to You Fed
DailyFX Economic Calendar: For updated and timely economic releases.
Retail sentiment is an important tool for any trader to help gauge market sentiment and positioning. We provide updated daily and weekly positional changes on a wide range of currencies and asset classes to help decision making.
Market Movers with Updated News and Analysis:
- Sterling (GBP) Price Slips on Renewed Brexit Confusion, UK Inflation Stable.
- Preview for March FOMC Meeting and US Dollar Price Forecast.
- Trading Outlook for Gold Price, Crude Oil, Dow Jones and More.
- FTSE Technical Analysis – Support on Dip, New Levels of Resistance Targeted.
— Written by Nick Cawley, Market Analyst
To contact Nick, email him at Nicholas.Cawley@ig.com
Follow Nick on Twitter @nickcawley1
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