Hang Seng Index

The Hang Seng has seen no fewer than six times already this year on the daily charts, and it looks like it wants to tally up a seventh.

Stability in US bond yields may offer AUD/USD rare respite this week. However, with strong ties to commodity prices and Hang Seng futures, the Aussie remains closely linked to China’s economic outlook. Here’s why both factors may need to align to fuel a recovery in the pair.

Hang Seng and China A50 futures delivered obvious bullish reversal patterns on Friday, hinting the unwind from the recent highs may have run its course. While some may say the rebound was driven by stronger-than-expected Chinese economic data released during the session, both moves started from known levels, suggesting it may have been technical in nature.

Hang Seng and China A50 stock futures continue to rip higher, benefitting not only from continued panic buying following last week’s monumental surge but also the fact they have resumed trade with mainland markets still closed for golden week holidays.

The Dow Jones produced a sharp reversal at its record high and the Hang Seng has stalled at a key resistance level. It may not take much of a beat for US data to prompt a pullback for risk.

We’ve seen plenty of short squeezes before that have quickly run out off puff. But with speculation swirling that policymakers may follow up Tuesday’s monetary policy easing with fiscal stimulus ahead of Golden Week holidays, that alone may be enough to promote further gains in the days ahead.

Chinese regulators will slash interest rates, free up cash for banks to lend and implement measures to support the stock market, designed to help address flagging economic activity and inflation. However, none of the moves directly boost demand, raising questions about just how effective they may be in delivering a sustainable improvement in sentiment.

For all the fundamental reasons put forward to explain their day-to-day movements, one look at price action suggests technical factors are arguably just as important in determining movements in the likes of Hong Kong’s Hang Seng, USD/CNH and crude oil. With each of these markets near important levels, we look at the price signals to evaluate where their directional risks lie.

The rebound on Wall Street indices on Wednesday gave an extra spring in the step for APAC equities today. But can the Hang Seng and Nikkei extend their own rallies from here?

With support in place and momentum trying to turn higher, we’re now looking for additional gains on the China A50 and Hang Seng.

If the Politburo wants to get Chinese markets excited about what may come out of next week’s third plenum, it better get cracking. Because with economic activity coming off the boil and with no sign of major stimulus measures in sight, not only are stock indices rolling over but breaking or threatening to break key levels on the charts.