Asia equities rallied on Yellen’s statement; yen retraced to key support levels

A bright day for Asian equities, with most indices heading up.

Equities - A remarkable day for Asian equities, with almost all indices fishing higher except for the Japanese market which was dragged by a stronger yen. The Hang Seng Index soared 2.15% to 20,803, its highest level year to date. The Shanghai composite was up 2.77% to 3000.65, challenging the key resistance level again. Singapore’s Straits Times Index finished 53.7 points or 1.9% higher, led by the three local banks and SingTel. The US’s S&P 500 advanced for the fourth day, closing 0.44% higher. The Euro Stoxx 50 rose 1.31%
 
How long is this rebound going to last? No one can really give an answer at the moment; but one thing for sure is that Yellen’s re-affirmed dovish stance gave the market sufficient comfort and room to breathe. This was reflected in the market yesterday. The chance of April rate hike has diminished, and whether or not a June hike will materialise has now become more questionable.
 
Commodities - Commodity prices are generally inversely correlated with the US dollar. Strangely, crude oil was not moving up despite the fact that the dollar index has collapsed over the last three days. One explanation is that hopes and expectations of an OPEC production freeze have been priced- in too early and traders are profit taking. On the other hand, oil inventories are still building and demand is weak.
 
FXUSD/JPY retraced to 112.49, near to the key support level of 112.0 and the next support level of 111.0. AUD/USD tested 0.770 before coming back to 0.766, finishing at its highest level this year. If AUD breaks above 0.770, the next support level will be at 0.785. USD/SGD retraced to the 1.351 area. Immediate support might be found at 1.347, followed by 1.330. A weaker USD is likely to direct capital back to emerging market currencies as the Fed has decided to take a pause on rate hikes. 

USD/JPY 

Key Technical levels to watch:

  • Immediate support levels:  112.0, followed by 111.0
  • Immediate resistance levels: 113.8-114.0
  • Triple bottom pattern showing in pattern-scanning 

Hong Kong 50 - Cash

Key Technical levels to watch:

  • Upward channel
  • Inverse head and shoulder
  • Immediate resistance levels – 21,000, 21,263, 22,128
  • Immediate support levels – 20,516, 19,600

 

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