Dow Jones Futures Fall, Hang Seng Risks Pullback, China Plenum in Focus


DOW JONES, HANG SENG INDEX OUTLOOK:

  • Dow Jones futures edged lower on virus concerns, fading stimulus hopes
  • China’s Party plenum kicks off this week, with an eye on Xi’s ‘internal circulation’ strategy
  • Hang Seng Index (HSI) may see short-term pullback, but overall trend remains bullish

Dow Jones Index Outlook:

Dow Jones, S&P 500 and Nasdaq 100 futures fell more than half a percent at the Monday open, sending a ‘risk off’ signal to Asia-Pacific equities. A rapid climb in the number of coronavirus cases across the US and more restrictive counter-virus measures implemented across the EU may dampen growth prospects. Meanwhile, hopes for a pre-election US relief package remained thin. Asia-Pacific equities may trade lower amid a relatively quiet economic calendar today.

The US has registered 85,085 and 78,702 new coronavirus cases on October 23rd and 24th respectively, hitting new records. The number of daily new Covid-19 cases have already surpassed the peak seen in mid-July, painting a worrying picture of a fragile economic recovery.

Source: Google

On the macro-side, this week’s key market events include:

Chinese Communist Party Plenum

US New Home Sales (MoM)

China Industrial Profits (YoY)

US Durable Goods Order, CB Consumer Confidence

  • October 28th (Wednesday):

Australia Inflation Rate

Bank of Canada Interest Rate decision

Bank of Japan Interest Rate decision

Germany unemployment rate, inflation rate

US advanced Q3 GDP growth rate, weekly jobless claims

ECB interest rate decision and press conference

Germany flash Q3 GDP growth rate

Spain flash Q3 GDP growth rate

EU core inflation, Q3 GDP growth rate

US core PCE Price Index, University of Michigan consumer sentiment

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Why do interest rates matter for currencies?

Technically, the Dow Jones index entered a consolidative period in mid-October and its near-term trend appears to be bearish-biased (chart below). An immediate support level can be found at 28,040 – the 38.2% Fibonacci retracement. 28,040 also happens to be where its 50-Day Simple Moving Average (SMA) line lies. An immediate resistance level can be found at 28,390 – the 23.6% Fibonacci retracement. Breaking above 28,390 may open room for more upside towards the next resistance level at 28,960 – the previous high.

The MACD indicator formed a “Death Cross” last week and prices have been trending lower since. This suggests that bearish momentum is dominating for now. The width of the Bollinger Band indicator has narrowed in recent days, signaling more consolidation ahead.

Dow Jones IndexDaily Chart

Dow Jones Futures Fall, Hang Seng Risks Pullback, China Plenum in Focus

Hang Seng Index Outlook:

The Chinese Communist Party Plenum will be held in Beijing this week to set economic goals for the next five years. President Xi’s ‘internal circulation’ strategy, which aims to re-balance growth towards domestic demand, may be a key focus at this meeting. Consumer, technology, renewable energy, financial sectors are among the top areas to watch on.

Chinese fintech giant Ant Financial will be dual-listed in Shanghai and Hong Kong in the weeks to come. With a potential price between US$ 35-45 billion, Ant may become world’s largest IPO ever. It also marks the first time that a major IPO is priced outside of New York.

Technically, the Hang Seng Index (HSI) has broken above its 100-Day SMA line and also has surpassed September’s high of 24,900. The overall trend appears to be bullish-biased, as the 20-Day has crossed above the 50-Day SMA recently (chart below), forming a “Golden Cross”. An immediate resistance level can be found at 25,065 – the 61.8% Fibonacci extension level, while an immediate support can be found at 24,855 – the 50% Fibonacci extension.

Hang Seng Index Daily Chart

Dow Jones Futures Fall, Hang Seng Risks Pullback, China Plenum in Focus

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— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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