FXTM’s CHINAH: On breakout watch ahead of key events

• Potential trading opportunities on horizon for CHINAH

• Raft of China data, Alibaba & JD.com earnings on Thursday

• CHINAH respecting bearish channel on D1 charts

• Key levels of interest – 5965, 6100 & 6225
  

If you are seeking fresh market opportunities, then look no further…

FXTM’s CHINAH which tracks the underlying Hang Seng China Enterprise index is trading around key daily resistance ahead of tomorrow’s event-heavy trading session.

On Thursday, key economic data from China and earnings from two Chinese e-commerce giants could trigger significant price swings on the CHINAH index.

But before we discuss how to take advantage of this trading opportunity, here are some fun facts about the CHINAH index:

• Gained roughly 4.5% year-to-date

• Down 14.3% from its 2024 high at 7025

• Respecting bearish channel on D1 chart

The lowdown…

Chinese shares have been on the decline over the past few weeks as China growth fears weighed on sentiment. Since May, FXTM’s CHINAH has recorded two consecutive months of losses and currently down over 1% in August.

Here are 3 forces that may move the index on Thursday:

  1) China policy rate + key data

The People’s Bank of China (PBoc) is expected to maintain its one-year medium-term lending faculty (MLF) rate at 2.3%.

So much focus will be on the barrage of data release, including the industrial production, retail sales and jobless rate among other key reports. Ultimately, better-than-expected data could boost confidence over China’s economic outlook – stimulating appetite for riskier such as the CHINAH index. Should overall economic data disappoint, this may drag the stock index lower.

  2) Alibaba earnings

Alibaba accounts for almost 9% of CHINAH’s weighting – claiming the title of biggest stock within the index.

This alone suggests that its earnings release before US markets open on Thursday could translate to heightened volatility for the stock index. Markets are forecasting Alibaba’s US listed shares to move 5.7% either up or down when US markets on Thursday.

Much focus will be on any updates regarding its cloud and AI-related efforts. Should the Chinese e-commerce giant’s earnings exceed market expectations, this may push Alibaba shares higher along with the CHINAH index.

  3) JD.com earnings

It will be wise to also keep an eye on JD.com which accounts for just over 2% of CHINAH. Markets are forecasting JD.com US listed shares to move 6.4% either up or down when US markets open on Thursday, just hours after its earnings are announced.

Investors will direct their attention toward profitability and how its e-commerce business performed in Q2 amid the fierce competition among major players in China. A strong set of results may support JD.com stocks along with the CHINAH index, and vice versa.

Note: Watch out for the incoming US July CPI report released later today. This could be a huge risk event that rattles global financial markets and influences overall risk sentiment. Its impacts may be reflected on the CHINAH when China markets open on Thursday.

Technical forces…

The trend remains bearish on the daily charts as there have been consistently lower lows and lower highs. However, bulls seem to be lingering in the vicinity with prices trading near a key daily resistance at 6100.

• A strong daily close above this level could encourage a move toward the 50-day SMA at 6255 and 6360.

• Should 6100 prove to be reliable resistance, prices may slip to 5965 before retesting 5800.