Hang Seng, China A50 futures look to build on strong end to last week

Hang Seng and China A50 futures printed outside daily candles on Friday
Both bounced from known levels, hinting the reversal may have been technical in nature
China Loan prime rates almost certain to be cut later in the session

Overview

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 long setup

Looking at Hang Seng futures first, the outside daily candle is a classic reversal pattern, sending the price back above 20725, a minor level that acted as both support and resistance earlier this month. A pickup in traded volumes on the day only enhances the bullish signal.

Those considering longs could buy around these levels or wait for a possible pullback towards 20725, allowing for a stop to be placed below Monday’s session low of 20670 for protection.

On the topside, resistance may be encountered around the downtrend dating back to the highs of October 10. It’s currently found around 20940. If that were to be broken, it may open the door for a push towards 21663, a minor level that provided both support and resistance in early October. Beyond that, we’re talking the double top of 23334.

While it’s only early days, it looks like the price has entered a falling wedge, hinting that if we do see a breakout it may be on the topside.

China A50 bounces hard from former resistance

The technical picture is much the same for China A50 futures traded in Singapore with Friday’s candle also an outside day built on strong volumes. The reversal has seen the price push and hold above 13557, providing a long setup for those seeking upside.

Longs could be initiated here or towards 13557 with a tight stop below for protection. If Friday’s high of 13795 can be overcome, look for a potential retest of 14015, a level where rallies were reversed constantly earlier in the month.

China Loan Prime Rates (LPR) likely to be cut

Later Monday, the People’s Bank of China (PBOC) is likely to cut loan prime rates for one and five-year terms by 20 basis points to 3.15% and 3.65% respectively, adding to monetary policy easing already delivered. Even though the announcement is expected, it may add to bullish sentiment in the near-term.

Loan Prime Rates (LPR) is the interest rate banks offer their best customers, acting as the benchmark for lending rates across the country. Set by a panel of banks, it directly impacts borrowing costs and plays a key role in the transmission of monetary policy in China.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.