official Market Update by Solidecn.com

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GBPUSD

Inflation Rate in the United Kingdom increased to 10.40% YoYin February from 10.10% in January, above market estimates of 9.9% YoY. 

 

The largest upward contributions came from restaurants and cafes, food, and clothing, partially offset by downward contributions from recreational and cultural goods and services (particularly recording media), and motor fuels. Core CPI rose 6.20% in February over the same month in the previous year, well above analysts' estimates of 5.7%. Fresh data may suggest that the BoE may not necessarily be approaching the end of the tightening cycle. Tomorrow a 25 bp rate hike is expected.

 

 

GBPUSD is trading higher today and fresh CPI data provided more fuel for bulls. The currency pair is moving further away from support zone in the 1.2215 area.

 

[Solid ECN ✔️]

JAP225

• US indices finished yesterday's session higher amid expectations that the Fed will tighten policy less aggressively in the evening. S&P 500 added 1.30%, Dow Jones moved 0.98% higher and Nasdaq rose 1.58%. Russell  outperformed and managed to finish 1.88% higher
• Indices from Asia-Pacific traded higher today - Nikkei jumped 1.94%, S&P/ASX 200 moved 0.87% higher while Kospi and Nifty 50 rose 1.12% and 0.20% respectively
• Indices from China traded 0.2-0.45% higher
• DAX futures point to a lower opening of today's European cash session
• ECB's Nagel said that policymakers have to be "even more stubborn" in inflation fight. In his opinion Eurozone banking system is resilient, not facing repeat of 2008
• First Republic Bank could potentially receive government backing, according to Bloomberg 
• API report pointed to a 3.262 million barrel build in US oil inventories (exp. -1.448 mb)
• RBC analysts believe that OPEC would intervene if oil prices dropped substantially. 
• Russia's Deputy Prime Minister Novak said that the country's current curtailed level of crude oil output would be in place through June 2023.
• Commerzbank lowered its 2023 midyear Brent crude oil forecast to US$80 a barrel (from $95)
• Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.5%, Ethereum adds 0.4%
• Energy commodities are lower - oil drops 1.0% while US natural gas prices fell over 2.6%
• Precious metals little changed - silver rose 0.16%, gold trades 0.8% higher
• AUD and NZD are the best performing major currencies while USD and CHF lag the most

 

Nikkei (JAP225) was one of the best performing Asian indices today. Index returned to crucial resistance at 27200 pts, which is marked with previous price reactions and 23.6% Fibonacci retracement of the upward wave launched in March 2020.

 

[Solid ECN ✔️]

EURUSD

The most popular currency moved higher on Wednesday morning following a set of hawkish comments from ECB President Lagarde. In her opinion policymakers are neither committed to raise further nor are yet finished with hiking rates. ECB does not see clear evidence that underlying inflation is trending downwards. The underlying inflation dynamics remain strong. Lagarde emphasized that the ECB is ready to act and provide liquidity support. 

 

 

EURUSD jumped above major resistance at 1.0765 following Lagarde comments, which paves the way towards net key resistance at 1.0900. This level coincides with 50.0% Fibonacci retracement of the downward wave started in June 2021.

 

[Solid ECN ✔️]

EURUSD

• The Fed  decision was as usual the most important macro event of the day. Federal Reserve decided to raise rates by 25 basis points as expected.
• The Fed left the QT programme unchanged, but kept the forward rate forecast at 5.1% unchanged.
• The Fed's change in communication is linked to problems in the banking sector. The Fed acknowledges that the tightening of credit conditions acts as a tightening of monetary conditions.
• But reducing interest rates this year is not probable and more interest hikes from the Fed may be appropriate;
• However, the Fed rules out interest rate cuts this year. The Fed believes that current policy is appropriate. This could mean a final hike in May;
• In the Fed's view, current liquidity measures are sufficient. The banking system is resilient and there is no widespread problem in the system
• In response, we saw a marked weakening of the US dollar. EURUSD rose to the 1.0900 level. In contrast, we saw strong gains on Wall Street. The US100 clearly broke through 13000 points and the US500 breached 4050 points
• Crude oil stocks rose by 1.12 million brk on expectations of a decline of 1.4 million brk. Oil gained more than 2 per cent today, making up for recent losses in oil due to uncertainty. WTI returns above $70 per barrel
• OPEC+ is not expected to consider major oil production cuts, despite recent strong price falls
• UK inflation came in higher than expected at 10.4%, resulting in a marked strengthening of the pound since the start of today's session
• A weaker dollar in the wake of the Fed's actions caused gold prices to rebound towards US$1,970 per ounce
• The euro received support from rumours that the ECB is thought to believe that recent stability measures for the banking sector should provide a basis for further hikes. Lagarde, on the other hand, spoke of the ECB not being compelled to both hike and cut or keep rates unchanged.

 

EURUSD tested the 1.0900 area against expectations of a near-term hike in the US. Source: xStation5

[Solid ECN ✔️]

US30

The dynamic declines on Wall Street initiated during the latter part of today's session were abruptly reversed by US Treasury Secretary Janet Yellen, who stated that she would provide additional deposit support if needed. Yellen added that anti-contagion tools may be applied again. Strong actions are to be taken to ensure deposits are safe. Stock indices rebounded dynamically after the new statement. 

 

 

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BTC Retests 9-Month Highs

Cryptocurrencies are gaining along with the major indices on Wall Street. Concerns about the banking crisis have eased somewhat, with investors finally taking a positive view of Fed Chairman Powell's comments yesterday. The rally continues despite news of an investigation into Justin Sun, the creator of the Tron blockchain, and subsequent fines targeting celebrities who promoted his cryptocurrency. The largest crypto exchange in the US, Coinbase (COIN.US), has received a so-called Wells notice evidencing possible enforcement and irregularities identified by the SEC regarding the assets and services offered on the platform. 

• The SEC maintains that all cryptocurrencies except Bitcoin are securities, while the Coinbase exchange has announced a confrontation with the regulator in court. At the time of Binance US's acquisition of the assets of bankrupt Voyager, a judge dismissed the SEC's request to halt the transaction;
• He pointed to the unclear regulation of the industry and the incompatibility of the SEC and CFTC regulators towards what cryptocurrencies de facto are. The industry read the position as a possible preliminary precedent for wins against the SEC in other court cases. However, the bullish sentiment faded somewhat after a broader announcement from the US Securities Exchange Commission, which warned against the crypto market;
• SEC maintains that entities that offer cryptocurrency trading may not be operating in accordance with US law. Despite these comments, shares of the Coinbase (COIN.US) exchange managed to erase some of the losses, although still losing nearly 11%. A general increase in risk appetite is supporting the quotations of the largest cryptocurrency.

 

Bitcoin, M30 interval. The price of the main cryptocurrency rebounded from the 23.6 Fibonacci retracement of the upward wave started on 10 March and the SMA100 and SMA200 averages. It has thus resumed the bullish momentum and is testing the previous resistance near 28,500 USD. Overcoming 28,800 USD could open the way for the bulls to rally towards 30,000 USD.

 

[Solid ECN ✔️]

EURUSD

France, PMI indices for March.

• Manufacturing. Actual: 47.7. Expected: 48; Previous: 47.4
• Services. Actual: 55.5. Expected: 52.4 Previous: 53.1

 

Germany, PMI indices for March.

• Manufacturing. Actual: 44.4. Expected: 47 Previous: 46.3
• Services. Actual: 53.9. Expected: 51.0 Previous: 50.9

 

 

Although industrial data remain under pressure, the Composite index surprises the consensus on the upside. Let's remember that services are responsible for most of Europe's GDP.

 

 

The EURUSD pair extends declines after a reading of PMI data from major EU economies. The combined reading for the Eurozone will be known at 10:00 am GMT.

[Solid ECN ✔️]

DE 30

• Indices from Asia-Pacific launched new week's trading mixed - Nikkei traded 0.4% higher, S&P/ASX 200 moved 0.1% higher, Kospi dropped 0.2% and Nifty 50 added 0.2%. Indices from China traded 0.2-0.8% lower
• Major European and US index futures are trading over 1% above Friday's cash closing prices
• DAX futures trade almost 300 points, or around 2%, above Friday's cash close while S&P 500 futures 50 points higher, or around 1.2%
• Silicon Valley Bank was sold to First Citizens with around $72 billion worth of assets being purchased at a $16.5 billion discount as part of the deal. All deposits assumed by First Citizens will be insured by FDIC up to the insurance limit
• First Citizens will also receive a line of credit from FDIC for unforseen liquidity events
• Russian President Putin announced that Russia will station tactical nuclear weapons in Belarus in response to Western countries increasing military support to Ukraine, especially UK providing Ukraine with depleted uranium ammunition
• ECB Schnabel noted that headline inflation began to fall, but core gauges are more sticky. She said that financial stress have so far been limited mainly to financial markets
• Fed Kashkari said that ongoing banking sector stress could bring the US closer to recession by triggering a credit crunch. However, he has noted that deposit outflow from smaller US banks have slowed and that confidence is being restored
• According to Reuters report, Russia is considering extending limits of fertilizer exports by another six months, until November
• Riksbank Governor Thedeen said that inflation is developing worse than it was previously thought and that another rate hike in April may be needed
• Cryptocurrencies are trading higher at the beginning of a new week - Bitcoin gains 1.4%, Ethereum trades 1.3% higher and Ripple jumps 1.7%. Dogecoin lags and drops 0.2%
• Energy commodities trade mixed - oil gains 0.6% while US natural gas prices drop 1.2%
• Precious metals are pulling back - gold drops 0.3%, silver trades 0.8% lower while platinum and palladium dip around 0.1% each
• EUR and AUD are the best performing major currencies while JPY and NZD lag the most

 

 

Futures markets point to a positive opening of a new week in Europe with German DAX futures (DE30) trading almost 300 points above Friday's cash close. Index is attempting to break above a mid-term resistance in the 15,250 pts area.

 

 

[Solid ECN ✔️]

 

EURUSD Economic Calendar

 

European indices gain at the beginning of a new week

• DE30 tests 15,300 pts area
• German Ifo index for March in the calendar

 

European stock markets launched today's cash trading session higher with German DE30 testing 15,300 pts area in the first minutes of trade. Upbeat moods can be seen all across the Old Continent and on other financial markets as well with cryptocurrencies trading higher and oil advancing. GBP and AUD are the best performing G10 currencies while USD and JPY lag the most.

 

Economic calendar for the day ahead is rather light with just two noteworthy survey data prints scheduled. First, traders will be offered the German Ifo index for March, which is expected to stay mostly unchanged. Secondly, the Dallas Fed index for March will be released and it is expected to swing to negative. Nevertheless, this report rarely moves the markets. However, a number of ECB speakers as well as BoE Governor Bailey and Fed Jefferson are scheduled to speak throughout the day and it may lead to some FX volatility. Things get more interesting in the second half of the week with releases of flash CPI data from Europe.

 

• 9:00 am BST - Germany, Ifo index for March. Expected: 91.0. Previous: 91.1
• 3:30 pm BST - US, Dallas Fed index for March. Expected: -5.0. Previous: 2.0

 

Central bankers' speeches

• 8:30 am BST - ECB De Cos
• 9:00 am BST - ECB Simkus
• 9:30 am BST - ECB Nagel
• 3:40 pm BST - ECB Elderson
• 4:00 pm BST - ECB Centeno
• 5:00 pm BST - ECB Schnabel
• 7:00 pm BST - BoE Governor Bailey
• 11:00 pm BST - Fed Jefferson

 

Key events in the later part of the week

 

Tuesday

• 3:00 pm BST - US, Conference Board consumer confidence for March
• 9:40 pm BST - API report on US oil inventories

 

Wednesday

• 3:30 pm BST - US, DOE report on oil inventories

 

Thursday

• 8:00 am BST - Spain, CPI inflation for March
• 1:00 pm BST - Germany, CPI inflation for March
• 1:30 pm BST - US, GDP report for Q4 (revision)
• 3:30 pm GMT - US, EIA report on natural gas storage

 

Friday

• 2:00 am BST - China, official PMIs for March
• 7:45 am BST - France, CPI inflation for March
• 10:00 am BST - Euro area, CPI inflation for March
• 1:30 pm BST - US, PCE inflation for February
• 3:00 pm BST- US, University of Michigan consumer sentiment for March (final)

 

[Solid ECN ✔️]

Breaking: EUR ticks higher after German IFO beat

German Ifo Institutes released a new set of business climate indices for March today at 9:00 am BST. Data turned out to be much better than expected. Headline index climbed from 91.1 to 93.3, while a downtick to 91.0 was expected. This was driven by solid beats in both current conditions and expectations subindices. Ifo economists noted that recession in Germany became more unlikely and that proportion of business that want to raise prices has dropped. Around 41% of companies complained about supply bottlenecks in March.

• German Ifo Business Climate for March: 93.3 vs 91.0 expected (91.1 previously)
• Current Conditions: 95.4 vs 94.1 expected (93.9 previously)
• Expectations: 91.2 vs 88.3 expected (88.5 previously)

Market reaction to the upbeat Ifo data was fairly muted. DE30 barely saw any move while EURUSD moved around 0.1% higher.

EURUSD ticked higher following release of better-than-expected Ifo data. The main currency pair is testing short-term resistance zone marked with 38.2% retracement of a recent upward impulse.
 

[Solid ECN ✔️]

EURUSD

EURUSD is struggling to find a direction at the beginning of a new week. The main currency pair is trading little changed on the day even in spite of a decent beat in German Ifo indices for March. Headline Ifo index jumped from 91.1 to 93.3 (exp. 91.0). This beat was driven mostly by a jump in expectations subindex from 88.5 to 91.2 (exp. 88.3). Nevertheless, EUR stayed fairly muted following the release. A number of ECB speakers scheduled for today may provide some volatility on EUR-related FX pairs later into the day. However, euro and other European assets are expected to get more volatile in the second half of the week as flash CPI data from the Old Continent will be released. German reading on Thursday, 1:00 pm BST and French reading on Friday, 7:45 am BST will be the most closely watched ones. Both are expected to show significant deceleration.

Taking a look at EURUSD chart at H4 interval, we can see that the pair halted the recent drop at the 50-period moving average (green line) near 38.2% retracement of the downward impulse launched at the beginning of February. However, subsequent rebound was halted today at the resistance zone marked with 50% retracement and the pair has struggled to determine direction for the next move since. A failure to break above could lead to a retest of the aforementioned 38.2% retracement in the 1.0710 area. On the other hand, a break above would pave the way for a test of swing levels marked with 61.8 and 78.6% retracements in 1.0830 and 1.0920 areas, respectively.
 

[Solid ECN ✔️]

Gold

The improvement of market sentiment puts pressure on safe haven assets

 

The beginning of the final week of March looks much compared to the end of the previous one, when the cost of insuring Deutsche Bank's debt against the risk of default surged to the highest on record on Friday. Today, however, the moods improved, mostly thanks to the final sale of Silicon Valley Bank, which may probably end the topic of instability of the banking sector. Additionally, the FDIC will continue to participate in the takeover of SVB by First Citizens.

 

In Europe, investors were worried that Deutsche Bank could be another bank which faces serious problems, but it is worth remembering that recent years have brought a significant improvement in the bank's situation. Firstly - Deutsche recorded 10 quarters of profitability, secondly, the CET1 index, which shows the bank's solvency, amounted to 13.4% (although it is still lower than the average for EU countries). On the other hand, the bank's coverage ratio was 142% at the end of 2022, and the net stable funding ratio reached 119%. These data do not suggest that the bank may collapse quickly.

 

 

Therefore, the moods are improving significantly - we are observing a solid rise of US yields, which puts pressure on gold. Price pulled back 1.5% below $1950 and approaches the local lows of March 21/22 and 38.2 Fibonacci retracement of the last upward wave.

 

[Solid ECN ✔️]

AUDUSD

• US indices finished yesterday's trading mostly higher with tech shares lagging behind. S&P 500 gained 0.16%, Dow Jones moved 0.60% higher and Russell 2000 added 1.08%. Nasdaq dropped 0.47%
• Indices from Asia-Pacific traded mostly higher today as well. Nikkei gained 0.2%, S&P/ASX 200 traded 1% higher, Kospi added 0.8% and Nifty 50 dropped 0.2%. Indices from China traded mixed
• DAX futures point to a slightly higher opening of the European cash session today
• Jose Manuel Campa, chair of European Banking Authority, warned in an interview with Handelsblatt that risk in the financial system remains very high and that increasing interest rates are weighing on financial markets
• French finance minister Le Maire said that France wants to cut the deficit to 3% of GDP by 2027. French budget deficit stood at 4.7% of GDP and was lower than 5% target set by the government
• Russia announced that it has carried out anti-ship missile tests in the Sea of Japan in a move that is seen as response to Japanese PM Kishida visiting Ukraine last week
• Goldman Sachs now estimates probability of US economy falling into recession within the next 12 months at 35%, up from previous 25%
• Fed's Jefferson said that inflation has been longer lasting and that current policy rate is too high
• Israeli Prime Minister Benjamin Netanyahu withdrew a judicial reform that spark nationwide protests
• Australian retail sales increased 0.2% MoM in February (exp. 0.3% MoM)
• Cryptocurrencies are trading mixed - Bitcoin drops 0.9%, Dogecoin trades 0.6% lower, Ethereum gains 0.3% and Ripple jumps almost 2%
• Energy commodities trade mixed - oil drops 0.3-0.4% while US natural gas prices climb 0.7%
• Precious metals trade mostly lower - silver and platinum drop around 0.1% each while palladium trades 0.5% lower. Gold is an outperformer with 0.2% gains
• AUD and JPY are the best performing major currencies while USD and EUR lag the most

 

 

In spite of a miss in Australian retail sales data for February, AUD is one of the best performing G10 currencies today. AUDUSD trades 0.6% higher today and has managed to break above the 200-hour moving average (purple line).

 

[Solid ECN ✔️]

Oil

Oil is catching a bid this week. Crude prices rallied yesterday with WTI jumping around 5%. The move is being continued this morning, although the scale of gains is not as big as yesterday, at least not yet. Gains are driven by an overall improvement in market sentiment, with concerns over the condition of the banking sector in Europe and the United States slowly fading. Today's move higher may also be supported by comments from the Russian Energy Minister who said that he expects Russian oil and gas production to decline in 2023. However, this can be hardly seen as news as a drop in Russian output has been foreseen as an aftermath of the West imposing sanctions on Russia for its invasion of Ukraine.

 

 

Taking a look at WTI chart (OIL.WTI) at D1 interval, we can see that price is attempting to break above the $73.00 resistance zone that served as the lower limit of a previously broken trading range. While price is trading almost 15% above a daily low from March 20, 2023, technical setup is not bullish yet. In order for it to become more bullish, a break above the $81.20 resistance zone would be needed as this is where previous local high, the upper limit of Overbalance structure and previous price reactions can be found.

 

[Solid ECN ✔️]

GBPUSD

Andrew Bailey, governor of the Bank of England, as well as two other BoE members (Sam Woods and Dave Ramsden) appeared before the Treasury Select Committee today for a hearing on Silicon Valley Bank collapse. Bailey noted that collapse of SVB was the fastest banking failure since Barings Bank failure, which collapsed in 1995 following massive 827 million GBP loss incurred by trader Nick Leeson. However, those two cases cannot be compared as Barings failed due to rogue trader actions while SVB collapsed due to bank run and poor interest rate risk management. Speaking on Credit Suisse, Bailey said that problems of Swiss bank were company-specific and should not be seen as a risk for domestic banks. Overall, Bailey said that does not think that any of the features of recent banking failings (SVB and CS) are causing stress in the UK financial system. He said, however, that we are in a period of heightened tensions in the markets and higher levels of alertness are needed.

 

 

Bailey's comments today were in-line with his remarks yesterday, when he noted that UK rate setters are unlikely to be distracted from fighting inflation by troubles of the global banking system. GBP saw some weakness following Bailey's comments today but the move immediately after remarks was barely noticeable. Taking a look at GBPUSD chart at D1 interval, we can see that the pair has reached the resistance zone marked with 50% retracement of the downward move launched in June 2021. Pair attempted to break above it last week but failed and today's attempt also looks to be under question. GBPUSD erased gains from earlier today, painting a long upper wick on D1 interval. However, should we see a break above this zone, the 1.2440 area, marked with local highs from previous months, could be the next target for buyers. On the other hand, failure to break above could see the price pull back towards the support zone marked with 38.2% retracement and 200-session moving average (purple line).

 

[Solid ECN ✔️]

Binance sued by CFTC - Crypto in retreat

US regulator CFTC is suing cryptocurrency exchange Binance and its founder Changpeng Zhao due to issues related to violation of trading rules and derivatives. The news triggered a sharp sell-off of Binancecoin. Bitcoin also took a hit and dropped below the 28,000 mark. Nevertheless, at the moment Binancecoin is losing less than 2%.

 

[Solid ECN ✔️]

USD unimpressed by Consumer Confidence data

US Consumer Confidence Index rose to 104.2 from 102.9 in March (revised to 103.4). Today’s reading came in above analysts’ estimates of 101.

• Present situation index 151.1 vs 153 prior
• Expectations index 73.0 vs 69.7 prior
• 1 year inflation 6.3% vs 6.3% prior
• Jobs hard-to-get 10.3 vs 10.5 prior
• 14.9% expect their incomes to increase, up from 14.4% last month

Conference Board Confidence index moved higher in March, however inflation expectations still remain high, which is not what FED would like to see. 

Simultaneously, Richmond manufacturing index for March was released. The index unexpectedly fell less than expected to -5 from-16 in February, while analysts’ expected -10.0 pointing to a modest improvement in business conditions. Of its three component indexes, shipments saw the largest change (up to 2 in March from -15 in February) and both the employment (-5 vs -7) and new orders (-11 vs -24) indexes improved but remained in negative territory. Firms continued to report easing of supply chain constraints as the indexes for backlogs and lead times remained negative. The average growth rate of prices paid decreased moderately, while the average growth rate of prices received changed little in March. Firms remained pessimistic about local business conditions and the index for future local business conditions edged down slightly.

EURUSD saw relatively small reaction to today’s data releases. The most popular currency pair continued to trade around 1.0820 level.

[Solid ECN ✔️]

USDCAD

USDCAD finally managed to break below the key short-term support at 1.3655. According to the Overbalance methodology, this may point to a change of the main sentiment to bearish. The level of 1.3655 should be treated as the first line of resistance. In turn, nearest support to watch can be found around 1.3535 and 1.3475 levels. 

 

 

[Solid ECN ✔️]

AUDUSD

• US indices finished yesterday's trading slightly lower. S&P 500 dropped 0.16%, Dow Jones moved 0.12% lower and Nasdaq plunged 0.45%. Small-cap Russell 2000 index dropped 0.06%
• Indices from Asia-Pacific are trading higher today. Nikkei gained 1.1%, S&P/ASX 200 traded 0.2% higher, Kospi traded flat and Nifty 50 gained 0.1%. Indices from China traded 0.1-0.2% higher while Hong Kong's Hang Seng gains over 2%
• DAX futures point to a slightly higher opening of the European cash session today
• US Energy Secretary Granholm said that refilling of strategic petroleum reserve may start this year
• Shinichi Uchida, deputy governor of Bank of Japan, said that if 10-year Japanese yield climbs to 2%, BoJ will experience an unrealized loss of 50 trillion JPY on its bond portfolio (currently 10-year yield sits at 0.3%)
• United States said that China shouldn't overreact to Taiwan president's visit to the United States. This comes after China warned that meeting between US officials and Taiwan president would be seen as provocation
• Lee Bokhyun, head of South Korean financial regulator, said that South Korean authorities will consider lifting the short-selling ban this year. Ban was imposed early in the Covid pandemic
• Australian CPI inflation decelerated from 7.4 to 6.8% YoY in February (exp. 7.4% YoY). Core inflation dropped from 7.6% in January to 6.9% YoY in February
• API report pointed to a 6.08 million barrel draw in US oil inventories (exp. +0.2 mb)
• Cryptocurrencies trade higher - Bitcoin gains 1.3%, Ethereum adds 1.1% and Dogecoin jumps 2.4%
• Energy commodities trade mixed - oil gains slightly while US natural gas prices drop
• Precious metals pull back amid USD strengthening - gold drops 0.5%, silver trades 0.7% down and platinum dips 0.6%
• NZD and USD are the best performing major currencies while JPY and AUD lag the most

 

AUD is pulling back after a lower-than-expected CPI reading for February. AUDUSD failed to break above the 0.6710 resistance zone and is now pulling back towards the 200-hour moving average (purple line).

[Solid ECN ✔️]

CHNCComp - Chart of the Day

HSCEI (CHNComp) was one of the best performing Asian indices during today's Asia-Pacific trading session. The index jumped over 2% today and painted a daily peak at 3-week high. Improved sentiment towards Chinese shares can be reasoned with recent performance of Alibaba (BABA.US) as the index and the stock are highly correlated. According to a Bloomberg report, Alibaba aims to divide the company into 6 different entities with each being responsible for its own financing and decisions like going public. This news triggered an over-14% increase in Alibaba's share price yesterday.

 

 

Taking a look at CHNComp chart at D1 interval, we can see that while the index managed to climb above the price zone ranging between 6,600 pts mark and 200-session moving average (purple line), it was later halted at 50-session moving average (green line) in the 7,000 pts area. What comes next will be crucial from a technical point of view. An inverse head and shoulders pattern can be spotted building up on the chart - a bullish pattern. However, a pullback towards the aforementioned 6,600 pts area would be needed for the pattern to take shape.