As the banking turmoil started to ease, the Hang Seng index futures (HKEX: HSI) went on a bullish rally to extend three consecutive days of gains. However, caution remained strong in the Friday session, with the Hong Kong Monetary Authority hiking interest rates by 25bps. 

The interest rate hike follows that of the US Federal Reserve, while year-on-year inflation statistics for the economy came in at 1.7%, a slower rise than the 2.4% the month before. The sentiment is likely driven by the central bank commentary, with the US hinting at a rate pause, while Hong Kong reminded that the spillover effects from the US banks remain a threat, even though their banks have little exposure to the US. The mixed sentiment sparked the caution, as the futures ticked down slightly in the Friday session. 

Technical 

This week, the futures broke out of a descending channel to start a bullish uptrend. The bulls got halted on their run at the 50% Fibonacci retracement level of 19959. If the market rejects the futures at this level, it could back down to support at 19821, with a breakout potentially bringing attention back to the 38.20% retracement at 19701.  

However, if the bulls keep pushing to improve sentiment to break through the 50% retracement, they could aim to retrace to the Fibonacci golden ratio of 61.8% at 20217. They might meet resistance at 20005, where high volume could be essential to sustain the momentum and continue the bullish trend. 

Summary 

The futures are currently riding the bullish momentum, but caution remains in the market, which could halt the bullish run and leg down to support at 19821 if the market resists at 19959. 

Sources: Koyfin, Tradingview, Reuters