Asian stocks surge strongly and broadly today. At the time of writing, Nikkei is up 0.88%, and Singapore Strait Times is up 0.66%. But the more powerful rallies are found in Chinese and Hong Kong stocks. The Shanghai SSE is up 1.43% while HSI is up 2.06%. The moves are partly follow-up to record close in NASDAQ and S&P 500 on Friday. Also, the markets responded positively to the PBoC’s measures to pause Yuan’s decline. In short, China’s central bank reintroduced measures that acts counter-cyclical to market forces to keep Yuan from falling too quickly.
USD/CNH (offshore Yuan) is now notably below August high at 6.9586. And 6.9871 key resistance 2016 high, temporarily defended. With a short term top formed, USD/CHN will likely gyrate lower to 55 day EMA (now at 6.7238) and possibly further to 38.2% retracement of 6.2358 to 6.9586 at 6.6825. But we’d like to emphasize that the pull back is also due post-Powell weakness in Dollar. And, for such a heavily intervened currency, technical analysis is not that useful generally.
Meanwhile, the currency markets are not too fuzzed with the developments. Yen ignores the return of risk appetites and trades higher today. Australian Dollar turns softer while Dollar remains weak. After all, the forex markets are quietly mixed. The UK will be on holiday today and the only notable data is German Ifo business climate. Light summary holiday trading might prevail.
