Asian stocks have ended the session neutral as concerns emerged by proposed US laws targeting Chinese telcos, including Huawei, could be damaging the Sino-US trade relations, while in Europe U.K. government survived a vote of no confidence in Parliament, Prime Minister May said she had begun holding talks with leaders of opposition parties on how to progress with Brexit efforts.
Japan’s Nikkei 225 is -0.13% down on the day, with the Tokyo Topix index up 0.35%. The Australian stock market edged higher for a third straight day with the ASX 200 gaining 15 points or 0.26% to 5850.1 on a choppy trading day. Hong Kong’s Hang Seng gained 0.4%, while South Korea’s Kospi finished 0.2% higher.
European markets started in green the day after Prime Minister Theresa May’s government yesterday won a no-confidence vote, as widely expected by investors. The DAX in Frankfurt is trading at 10,931 up 0.36% and CAC40 is adding 0.51% to 4779, while shares in FTSE give up 0.35%.
On the Lookout: In Greece Prime Minister Alexis Tsipras has survived one more confidence vote, which was called last Sunday after his coalition ally resigned. The Fed’s Beige Book report (which covers the period from late November to January 7), said economic fundamentals remain strong. Some districts reported growth had slowed. Meantime the partial government shutdown continues. The US weekly jobless claims, Philly Fed manufacturing index and Canadian ADP employment change data, all of which will be released parallelly at 1330 GMT. The G20 meeting begins today in Tokyo with BOJ Governor Haruhiko Kuroda delivering the opening remarks. The meetings go on for today and tomorrow.
Trading Perspective: Trade war fears were set to undermine sentiment in forex markets following reports that the US is investigating Chinese tech giant Huawei for stealing trade secrets from US business partners. GBPUSD is down 0.19% at 1.2855 after yesterday failed to hold above 1.29. Today the pair found support at 1.2850 figure during early European session. The hourly chart offers a positive stance, with strong resistance for GBPUSD at 1.29 where the 100-day moving average crosses and is also yesterdays high. A convincing break above can lead prices to 1.2942 and then 1.2985. On the flipside, the first support is at 1.2815 and on further losses looked for strong support at the 50-day moving average around 1.2765. Open interest in GBP futures markets decreased by almost 5K contracts on Wednesday vs. Tuesday’s final 221,098 contracts, the first drop following three consecutive builds. Volume followed suit and dropped by around 44.5K contracts, prolonging the choppy performance.
HSBC forecasts that a hard Brexit could drive GBP/USD at 1.1000 while if the UK stays in the European Union, GBP/USD will rise to 1.5500.
The Aussie dollar has weakened against a stronger USD while November’s housing finance data was again disappointing, and a potential warning for further softness in housing prices. The AUDUSD could remain under pressure on heightened trade tensions. The pair is trading close to daily high at 0.7164, and only a break above the 100-day moving average can give bulls the upper hand. Bears are targeting the support at 0.71.
EURUSD has found strong support the last 24 hours at the 50-day moving average even short term technical indicators are bearish. At the time of writing, the pair is making one more attempt to 1.24, a level that I am closely watching. If the pair manages to break above the 1.24, bulls will take control. A failure to do so will drive prices down to a yearly low from January 3, 2019, at 1.1306.
