Mixed sentiment across Asia amid falling China stocks

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 11, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Asia-pac currencies were trading mixed amid omnipresent risk-off markets profile, triggered by another selling wave that hit China stock markets this Monday. The USD/JPY pair recovered sharp losses seen in opening hours and now consolidates above 117 handle. While the Antipodes trade mixed, with the Aussie unperturbed by the ongoing weakness in the oil prices as well as the Chinese equities.

    Key headlines in Asia

    South African Rand hammered, worst day in 7 years

    PBOC sets USD/CNY at 6.5626 vs 6.5636

    China to face great difficulty achieving GDP above 6.5% - Top State Adviser

    Dominating themes in Asia – centered on JPY, AUD and NZD

    Despite, the second consecutive session of no yuan devaluation by the PBOC today and a slew of measures introduced by China’s authorities last week, the Chinese equities snapped Friday’ rebound and resumed the broader downtrend. The renewed sell-off in the Chinese stock markets was triggered on resurfacing China economic troubles after the weekend’s China CPI figures disappointed markets once again. China’s CPI rose 1.6% y/y in Dec, against a rise of 1.7% forecast by markets, and well below the government's target of around 3.0%.

    However, the negative performance on the Chinese indices was almost priced-in by markets well at Asia opening from multi-month lows amid China sticks sell-off. USD/JPY jumped back on the 117 handle and now recovers most losses to trade around 117.40 levels amid light trading as Japan’s markets remain closed on a public holiday. While the AUD/USD pair extends towards daily highs near 0.6980, recovering from a dip to 0.6928 – fresh five-month lows.

    On the other hand, the Kiwi remains under pressure on the back of risk-off moods and lower commodities’ prices. While the euro fails to benefit from the falling Asian markets and remains in the red against the US dollar, with markets following the “sell-on rallies” strategy for the main currency pair.

    On the equities space, Asian indices tracked China lower, with Japan’s benchmark, the Nikkei losing -0.40% to 17,697. Australia’s S&P/ASX index plunges to 4,925, recording a -1.30% loss into the closing hours. The Chinese equities came under fresh selling pressure, with the Shanghai Composite dropping -2.40% while Shenzhen’s CSI300 index tanks -1.79%. Hong Kong’s Hang Seng lost the 20k barrier for the first time since June 2013, down over -2.50% on the day.

    Heading into Europe and North America

    We have a light economic EUR calendar to start off this week, with the only second-line of data in the Euro zone Sentix Investor Confidence release.

    Likewise, the North American calendar also remains quiet for today, as the US calendar offers the labor market conditions report, while housing starts and the BOC Business Outlook Survey from Canada might keep the traders busy.

    EUR/USD Technicals

    Valeria Bednarik, Chief Analyst at FXStreet explained, “Technically the daily chart shows that the price has fallen down to the 61.8% retracement of the December rally, where strong buying interest pushed it back higher, although sellers keep surging around the 23.6% of the same rally around 1.0925, the immediate resistance. In the same chart, the technical readings present quite a neutral stance as the technical indicators remain stuck around their mid-lines. Shorter term, and according to the 4 hours chart, bulls retain control, as the technical indicators are grinding higher above their mid-lines, whist the price has recovered above a now bullish 20 SMA. The immediate support for this Monday comes at 1.0845, the 38.2% retracement of the same rally. Support levels: 1.0845 1.0800 1.0750 Resistance levels: 1.0925 1.0960 1.1000.”
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