Originally published by AxiTrader
It should be a better day for Asia's bourses today after markets yesterday mostly (save for the KOSPI) held support and after US stocks ended the day in positive territory.
It could be a very different story, and outlook for Asia's currencies however as the US dollar seems to systematically grinding opposition into the dirt. I say that because it is making unspectacular but solid and holdable gains as forex traders reassess the impact of the tax cuts on the economy and the possible path of Fed rate hikes in the year and years ahead.
Now all that could come unstuck if the Fed is unexpectedly dovish next week after the much anticipated December rate hike.
But it is likely given the reality that tax cuts are in the process of reconciliation between the House and Senate bills and will thus become law that the Fed has to address the impact on the economy and policy. Certainly chair Yellen is bound to be asked such a question at her press conference at the very least.
That is likely to continue to underpin the US dollar across the board and in DollarAsia terms.
And as I have been writing this week it was the 1.35 level in the USDSGD that I was waiting for as confirmation of the move higher in USDAsia forex pairs. And as the chart shows USD/SGD has broken through the downtrend in the past 24 hours and my target would be for a move to 1.36 at a minimum with 1.3700/15 the ultimate target.
The won is at 1092 and looks biased back well above 1100 while other Asian pairs look similarly pressured by the US dollar.
Turning to stocks now and it was a mixed day in Asia yesterday but it could have been much worse. At one point all of the major indexes I watch across the region were either in the red or flat on the day.
But things managed to stabilise and while the Shanghai Composite, CSI 300, and China A50 indexes were all lower the Hang Seng was able to hold its trendline. The Kospi had an awful day though breaking lower with the best thing that could be said of it is that it closed off its lows.
The big question is whether Asia is going to continue to march to its own - somewhat bearish - drum or whether the positivity emanating from the US stock markets will permeate traders minds and drive a better day ahead.
In no small part the Chinese trade data this afternoon - released at 2pm AEDT - will go a long way to drive sentiment across the region. How exports and imports in the world's second-biggest economy stack up and what they suggest about Chinese and global growth could be important for sentiment in forex and stock markets in Asia.
Likewise the latest read of Japanese GDP - though I feel China's trade is more important.
Looking at today's stock index chart and the Hang Seng is pretty much as it was yesterday except it has a nice little up candle which found support where it should have yesterday. So in MT4 terms it's still the case that the trendline and past two days lows in the 28150/70 region needs to hold.
Looking at the China A50 then and it's not out of the woods just yet. The 12,774/12,840 region has to hold to avoid a deep fall.
Have a great day's trading.