USD/HKD Technicals – Double Top forming on positive GDP data

Hong Kong’s Q4 grew 2.5% Y/Y vs expectations of 2.4% pushing HKD stronger and Hang Seng Index higher. Growth rate appear to be accelerating from previous quarter read of 1.3%, which led analysts to believe that 2013 could grow at 3.1%, while official estimates place economic expansion to between 1.5 – 3.5%.

Hourly Chart

After Bernanke’s speech overnight which assured investors that QE is here to stay, USD weakened against HKD, bringing price back to the rising Channel Top. A technical rebound followed, which is understandable especially after a relatively huge sell-off. After Asian market opened, USD/HKD began to collapse as optimism from US spilled over to Asia stocks, pushing them higher and weakened USD further, eventually pushing price back into the rising Channel.

Daily Chart

Yesterday’s failure to test 7.76 will come back to haunt bulls, as price is looking to form a double top chart pattern with current candle as the apex of the 2nd top. Price is now trading below the rising trendline from Jan lows which has been providing strong support/resistance. Stochastic readings are also starting to turn around with a Stoch/Siganl cross just around the 80.0 mark. A break of 38.2% Fib retracement may help to confirm the Double Top pattern, though conservative traders may wish to see 50.0% Fib (and also October Swing High) taken out before wagering money on a move back towards 7.75.

Fundamentally, there will be scope for HKD to strengthen as long as market optimism continues to fly. Past week’s USD/HKD rally has been due to Fed’s ambiguous minutes which scared market into USD buying. There are some reasons to believe that price may make a U-turn here, as US Consumer Confidence has grew significantly from 58.4 to 69.6 this month, shattering expectations of 62.0. New Home Sales have also grew from -3.8% to 15.6%. The narrative is slowly shifting from stopping QE to focusing on US economy’s inherent strength. Should that continue, USD buying will be limited and we could see USD/ASIA such as HKD going back to pre panic (see early Feb) levels.

More Links:
NZD/USD – Unfazed by worsening Trade Balance
AUD/JPY Technicals – 93.50 broken but Bernanke Saves the Day

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