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Nasdaq 100 rally may inspire Nikkei 225, APAC stocks to trade higher

The Hang Seng Index gained 16% in two days, rendering it vulnerable to profit taking and Japan’s Nikkei 225 index jumped 3.4% on Thursday, challenging a key resistance level.

Tech rally, FOMC, Ukraine, Nikkei 225, Asia-Pacific at open

Wall Street equities extended higher on Thursday as investors shrugged off geopolitical tensions as Kyiv and Moscow are reportedly moving closer to strike a ceasefire deal. The Federal Reserve raised interest rates by a quarter point at Wednesday’s FOMC meeting and signaled that the US economy is strong enough to withstand six more rate hikes this year. The statement underpinned investor confidence and removed uncertainty surrounding monetary policy.

Meanwhile, Chinese stocks listed in Hong Kong and mainland rallied for a second day after authorities pledged to support overseas stock listings and to keep Chinese capital market stable. While this may pave the way for further gains in the medium-to long-term, an immediate pullback is possible if the eye-watering rally over the last two days entice profit taking. The Hang Seng Tech Index soared almost 30% from the recent bottom, marking its largest two-day gain ever. Chinese tech ADRs pulled back overnight, with Tencent, Alibaba and JD.COM falling -7.6%, -4.4%, and 3.3% respectively.

In Japan, the Nikkei 225 index jumped 3.4% on Thursday as a weaker yen boosted the appeal of stocks in the export-oriented country. USD/JPY surged 1.2% this week to 118.70 – the highest level in five years. The Federal Reserve’s commitment to further tighten its monetary policy may continue to boost the Greenback against the Japanese currency, fueling a rally in Japanese stocks after months of selling. The Nikkei 225 is attempting to breach a key resistance level, and more details can be found at the end of this article.

Today’s BOJ meeting will be closely eyed by investors. The central bank is expected to maintain policy rate and asset purchasing program unchanged amid a fragile economic recovery from the pandemic. The recent surge in crude oil and raw material prices as a result of the Ukraine war further strengthened this prospect as Japan is Asia’s second-largest commodity importer after China.

USD/JPY

Asia-Pacific markets look set to open higher on Friday following a positive lead on Wall Street. Futures in Japan, mainland China, Australia, Taiwan, Singapore, India and Thailand are in the green, whereas those in Hong Kong, Malaysia and Indonesia are in the red.

Looking back to Thursday’s close, all 11 S&P 500 sectors ended higher, with 83.4% of the index’s constituents closing in the green. Energy (+3.48%), materials (+1.95%) and consumer discretionary (+1.86%) were among the best performers, whereas defensive-oriented utilities (+0.46%) and consumer staples (+0.59%) trailed behind.

S&P 500 Sector Performance - 17 March 2022

Nasdaq 100 technical analysis

The Nasdaq 100 index has breached above the ceiling of a 'Descending Channel' as highlighted on the chart below. This may signal a bullish trend-reversal and pave the way for further upside potential with an eye on 14,160 for resistance. The MACD indicator formed ab bullish crossover beneath the neutral midpoint, suggesting that buying pressure may be building.

Nasdaq 100 index – daily chart

Nikkei 225 index technical analysis

The Nikkei 225 index is attempting to breach above the ceiling of a 'Descending Channel' as highlighted on the chart below. A successful attempt may intensify near-term buying pressure and open the door for further gains. An immediate resistance level can be found at around 26,670 – the 100% Fibonacci extension. A long bullish candle formed on Thursday signaled a short-term bullish trend reversal and may pave the way for further gains. The MACD indicator formed a bullish crossover beneath the neutral midpoint, suggesting that bullish momentum is building.

Nikkei 225 index – daily chart

ASX 200 index technical analysis

The ASX 200 index breached above a trendline support as shown on the chart below. Prices are hitting an immediate resistance level at 7,290, breaching which may open the door for further upside potential with an eye on 7,435. The MACD indicator is trending higher, underscoring upward momentum.

ASX 200 index – daily chart

Follow Margaret Yang on Twitter @margaretyjy

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