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Asia markets cheering developments

Risk sentiment improved on multiple fronts from Wednesday’s session, sustaining a positive mood for Asia going into Thursday. The attention turns towards the US labour market update going into the end of week.

Respite for Hong Kong

A series of positive developments had been seen through Wednesday’s session commencing with China’s Caixin services PMI surprise, though the biggest trigger for the wave of gains had been none other than the retraction of the controversial extradition bill for Hong Kong. That had seen to the HSI gaining 3.9% in the session, and likewise enthusing Wall Street thereafter. Similarly, headed into the Asia open, we are expecting gains to sustain and certainly seeing early movers across Australia to Japan keep up with the positive glow. Haven assets, the likes of USD/JPY were last seen holding up at $106.40 levels even as the US dollar likewise receded on this relief.

For the HSI, it had certainly been a surprise deviation from trend that we had seen this week. Against expectation for prices to breakout lower from the triangle pattern amid the on-going unrest and trade woes, prices had taken strongly to the sense of relief and hopes that this latest development could help to ease the tensions. That said, strong resistance can be seen up ahead at around 26,658 and it remains uncertain if the retraction would be enough to placate the masses moving forward or encourage further demands as seen from remarks from activists. A break of the resistance may find prices consolidating higher, but given the uncertainty, it may be more likely that we will see rejection here.

Source: IG Charts

Brexit can kicked down the road

Notably, supporting the improvement in sentiment had also been the brewing hopes that the Brexit deadline may be kicked down the road. This comes after the latest UK parliament’s vote and the rejection of PM Boris Johnson’s push to hold a snap election on October 15 to push UK into a hard Brexit. GBP/USD leaped to a 1-week high at around $1.2250 in the early hours of Thursday, testing the downtrend resistance. While the likelihood of an October 31 exit had decreased over the course of this week, the eventual outcome remains up in the air that could provide little concrete support for the pound moving forward. That said, the support at around $1.2082 appears a strong one that could hold the currency pair for the time bring and a breakout from the downtrend would support short-term gains from a technical perspective.

For the day ahead, a light data calendar appears to the case. Focus ahead to the private ADP employment report out of the US ahead of Friday’s non-farm payrolls. The series of dovish comments from Fed speakers in the Wednesday session continues to back the expectation for further Fed cuts to come along, but it will also be the labour market update to play a part in shaping expectation from the data end.

Source: IG Charts

Yesterday: S&P 500 +1.08%; DJIA +0.91%; DAX +0.96%; FTSE +0.59%

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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