- Hang Seng Index has dropped by -2.4% since last Friday’s high ex-post interest rate cuts by PBoC.
- Short-term uptrend from 31 May 2023 low remains intact as it still trades above the 200-day moving average.
- Key support to watch will be at 19,090.
This is a following-up analysis of our earlier publication, “Hang Seng Index Technical: Potential breakout from channel resistance” dated on 9 June 2023 (click here for a recap).
The Hong Kong 33 Index (a proxy for the Hang Seng Index futures) has staged the expected bullish breakout and almost met the first resistance of 20,300 as it rallied by +5% from 9 June to an intraday high of 20,205 last Friday, 16 June in light of a shift in the China central bank, PBoC conservative targeted monetary policy stance to a more accommodating approach as it cut 3 key interest rates within two weeks; 7-day reverse repos, 1-year medium-term lending facility, and the 1-year & 5-year loan prime rates today, 20 June that are being used to price corporates/consumer loans and mortgages respectively.
Since Monday, 19 June, the Index has tumbled by -2.4% which seems to have fallen victim to the “buy the rumours, sell on the actual news release” mantra as today’s cut on the loan prime rates have been almost fully priced in.
Fig 1: Hong Kong 33 minor short-term trend as of 20 Jun 2023 (Source: TradingView, click to enlarge chart)
The current drop in price actions is now coming close to a key pull-back support area
The Index is now hovering right above the former descending channel resistance and now turns pull-back support at 19,440 and the 200-day moving average coming in as support at around 19,090.
Also, the 19,440/19,090 support area confluences with 38.2% and 50% Fibonacci retracement of the minor short-term uptrend phase from the 31 May 2023 low to the 16 June 2023 high.
The momentum indicator is also at a parallel/corresponding support
The 4-hour RSI oscillator, a momentum indicator has exited from its overbought area, and it has now reached a corresponding support zone of 42%/36% which may lead to a potential positive reversal in price actions.
19.090 key short-term pivotal support to maintain the minor short-term uptrend phase with intermediate resistances coming in at 20,300 and 20,900.
On the other hand, a break below 19,090 negates the bullish tone to expose the 18,130/17,630 key medium-term support.
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Kelvin Wong