The Hang Seng Index Futures (HKEX: HSI) are struggling during the Friday session as Chinese economic growth concerns continue to weigh on investor sentiment. The recent economic data from the world’s second-largest economy showed that the economic recovery might be hitting a snag after the inflation came in lower than expected at 0.1% versus the expected 0.4%, its lowest rate in over two years.

The sluggish consumer spending in China affected the manufacturing sector, with the producer price index shrinking by 3.6% in April to reach its lowest level in three years. The bulls will be looking to the upcoming Hong Kong GDP data for some reprieve from the bears’ wrath in the near term.

Technical

The 4H chart shows that the index futures have formed a symmetrical triangle trading pattern as the market continues to react to the volatile macroeconomic conditions that have influenced the sentiment around the Chinese and Hong Kong Economies.

With the price action trading on the ascending lower trendline, the bears could hope to push the price below the 61.80% Fibonacci retracement level, which could confirm a breakout of the triangle. A sustained break would bring the 19501 and 19281 support levels into play.

Failure to break below the golden ratio would leave the 20035 and 30356 resistance levels firmly within the bulls’ reach. It is worth noting that the 50% Fibonacci retracement level and the descending upper trendline of the triangle would offer significant resistance to the bulls’ run.

Summary

The bearish market sentiment around the Chinese economic growth concerns could outweigh positive data from the upcoming GDP in the Hong Kong economy. However, negative growth data could boost the bears’ push for a  breakout from the triangle. Traders would closely watch the reaction of the index futures around the golden ratio as the fall of the level could trigger a breakout towards the significant support levels.

Sources: TradingView, Reuters.

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