Most Asian stocks rebounded during the Asian trading session on Wednesday, tracking modest gains in U.S. stocks as recovery bets became the dominant theme. Asian stocks were flat as gold rose to around $1,860.
By the close of trading, Australia’s ASX200 index was up 0.11%; The Nikkei 225 closed up 1.05 per cent; South Korea’s Kospi index closed up 0.71%. A shares were all down.
Despite the spread of the disease, Japan’s health ministry said a panel of experts on the epidemic had approved a state of emergency in seven prefectures. The number of new cases in China in a single day was the highest in five months. But the market is still ignoring this chapter, focusing on the expectation that the vaccine will eventually win the war against the epidemic.
Peter Essele, director of portfolio management at Commonwealth Financial Network in Boston, said investors are betting that the incoming Biden administration will speed up the delivery of the new vaccine, which would allow much of the U.S. economy to restart.
“Pent up demand is slowly coming out and this is likely to lead to the strongest growth in 20 years over the next year and the market is pricing that in,” Mr Essele said. “Right now it’s a race between new cases and the vaccine, and the vaccine is winning, and the curve will flatten.”
In currency markets, major currencies were little changed after a turnaround on Tuesday, and so far the day has got off to a mixed start.
The dollar weakened, U.S. bond yields fell slightly after a strong auction and expectations of tapering eased after recent comments from the Federal Reserve raised hopes for a shift in policy stance later this year.
U.S. Treasury prices extended gains in the Asian session, which pushed benchmark 10-year yields further away from near one-year highs and caused the yield curve to flatten slightly.
The retreat in Treasury yields took some of the momentum out of the dollar’s recent rally, with investors cautiously resuming bets that the greenback could resume its slide.
From a technical point of view, the dollar is a bit of a challenge for dollar buyers after its recent push higher. The dollar has recently lost some momentum after failing to break through key levels on the daily chart, forcing a revaluation.
The pause in the rise in yields may be justified, but in the absence of short-term curve follow-through, the durability of the recent breakout remains questionable — as is the likelihood that the dollar will continue to strengthen.
In commodities, spot gold maintained its rally, trading around $1,860, as the dollar and Treasury yields eased, while the prospect of a massive U.S. fiscal stimulus also increased bullion’s appeal as a hedge against inflation. Silver, meanwhile, was flat.
Gold prices rose slightly on Wednesday, with IG Market analyst Kyle Rodda saying, “Overall, it’s still a very positive year for gold. “With real Treasury yields still negative and the dollar continuing to weaken this year, gold remains an attractive option.”
This trading day, the market is still the US political situation. With seven days left in office, Mr. Trump is facing impeachment charges. At least three Republicans, including a top House member, have said they will vote to impeach President Donald Trump after his supporters violently attacked the Capitol building.
The House of Representatives is due to vote on the impeachment case at around 15:00 local time on Wednesday.
The impeachment trial is likely to continue even after Mr Trump leaves office on January 20, but analysts said they did not expect further political turmoil in Washington to affect markets.
Trend analysis of major currencies:
EUR: EURUSD continued to consolidate around the 1.22 level after rebounding yesterday. Technically, the 4-hour chart shows the MACD red momentum column expanding, the RSI indicator holding steady above the 50 level, and the KDJ indicator moving up towards the overbought level, indicating there is room for a near-term rally in prices. Initial short-term support stands at 1.2160, initial resistance is seen at 1.2250.
GBP: GBP/USD held on to yesterday’s gains above 140 and is now trading around 1.3680. Technically, the MACD red momentum column continues to expand and hold steady on the 4-hour chart, with the RSI index hitting overbought levels and the KDJ index also rebounding upward above the 50 level, suggesting prices may move higher in the short term. Initial short-term support stands at 1.3620, initial resistance is seen at 1.3700.
JPY: USD/JPY came under further pressure after yesterday’s sell-off, trading below 103.50. Technically, the MACD green momentum column is gradually expanding on the 4-hour chart, with the RSI indicator trading below 50 and the KDJ indicator trading within oversold levels. Price is expected to face downward pressure in the short term, but the decline may slow. Initial short-term support stands at 103.20, initial resistance stands at 104.00.