Chinese Stocks Lower Ahead of Fed

Chinese stocks are sitting off recent highs today. Despite the Chinese government having further relaxed various covid restrictions over the last few weeks, traders are watching developments carefully amidst news of a surging covid outbreak in Beijing. While there has been much speculation around the potential scrapping of the government’s zero-covid policy, news of infections is a worrying headwind to optimism.

As with most indices recently, Chinese stocks have been buoyed by a scaling back of hawkish Fed expectations amidst lower US inflation data. With US CPI seen falling once again last month, traders now await the latest outlook from the Fed today at the conclusion of its two-day December FOMC meeting. Given the concerns around the covid situation in China, however, it will likely take a sharp move lower in USD to propel SHCOMP to further gains here. Yesterday’s reversal in initial equities gains reflects the cautious outlook among traders ahead of the event, paving the way for plenty of volatility today should the Fed surprise one way or the other.

Technical Views

SHCOMP

The rally off the YTD lows has seen the marker breaking out above the bear channel from YTD highs. Price has been moving higher within a narrow bullish channel and is now testing the 3185.9209 area resistance. This is a key area for the market and a break above here will turn focus to a test of the 3347.6880 level next and the bull channel top. To the downside, should we slip lower here, 3043.1853 is the next support to note.