The prospect of stimulus in the US boosts the Asian stock market

Februar 08, 2021 14:30

Since Joe Biden's arrival at the White House, negotiations have intensified on Capitol Hill regarding a new stimulus plan worth 1.9 trillion dollars.

In principle, as announced last week by Treasury Secretary and former Fed chair Janet Yellen, US citizens with an income of less than $60,000 a year will benefit from this direct aid aimed at supporting the US middle class.

The measure is focused on trying to boost consumption and investment, thus supporting the labour market, data for which was released last Friday. These updated figures left a bittersweet taste because, although the unemployment rate was much better than had been anticipated (6.3% compared to the expected 6.7%), job creation was lower than expected. 

The prospect of this new aid programme together with the improved outlook for the labour market have caused the week to start with rises in the main stock market indices, with particular strength shown in the Asian session with the Nikkei rising 2.12%. This strong rise has led the Japanese index to reach levels not seen in 30 years, closing at 29,388.50 points.

Technically speaking, as we commented last December, the uptrend of the Japanese index has been clearly bullish since last March after reaching its lows with the sharp falls caused by the start of the pandemic. After the last support at its trend line, the price has undergone two bullish impulses followed by two sideways channels of price consolidation supported by its black 18-session moving average which led it to break above this channel with a new bullish gap.

This could lead us to think that the price may continue to look for new highs, although it is important to see if the price will look to close the bullish gap by supporting itself on the 18-session moving average, as it did last time, in order to continue with this momentum.

Although there is a bearish divergence between the price and its MACD indicator, for the moment the uptrend seems strong with its 3 moving averages having an upward slope and far from its trend line. However, we should always keep an eye on its current support levels (green band of the last sideways channel, 18 sessions moving average and red band of the sideways channel).

Depicted: Admiral Markets MetaTrader 5 - JP225 Daily Chart. Date Range: 1 November 2019 - 8 February 2021. Date Captured: 8 February 2021. Past performance is not necessarily an indication of future performance.

Price evolution of the last five years:

  • 2020: 16.01%
  • 2019: 18.20%
  • 2018: -12.08%
  • 2017: 19.10%
  • 2016: 0.42%

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