Hang Seng Index Retreats After PBoC Rate Cuts; Short-term Uptrend Maintains Above 200-day Moving Average

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.

Craig Erlam

Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.