AUDUSD Short Gives Up Initial Gains
The 50-Day EMA is offering a little bit of resistance, and the area above there finds the market between that indicator and the 200-Day EMA, typically an area that causes a lot of volatility.
Recently, we had been stuck between 0.68 and 0.66 in a relatively well-defined area of consolidation. However, in the last couple of weeks, we have seen volatility pick up quite drastically as we plunged below the bottom of that consolidation, only to turn around and rip above the top of it before pulling back yet again. In other words, the market has completely lost its mind.
You will need to protect yourself if you are absolutely insistent on trading the Australian dollar, which at this point might be a bit difficult to do. Keep in mind that there are some external factors you need to pay close attention to if you are going to try this market, as the Australian economy is almost purely export based.
The Reserve Bank of Australia has recently raised interest rates by 25 basis points out of the blue, the reality is that Austria is still held hostage by global demand for its hard commodities
This is especially true when it comes to the Chinese economy, which of course is the number one export market for Australians. Pay close attention to commodity prices overall because they can give you a bit of a “heads up” as to what’s going to happen with the Australian dollar as well.
A good reference is also to checkout the following charts to understand AUDUSD better
click on the charts below to read the fundamentals and techncial trading,so you will find a symmetrical positive correlation between the 3 assets
China50
Hong Kong 50
On the other side of the equation, you have to pay close attention to the fact that the Federal Reserve is choosing to stay tight with its monetary policy, so that does drive a certain amount of US dollar strength, especially as interest rates in America remain so elevated. Because of this, I think ultimately this pair does fall from here, but it needs to show its hand first. As things stand right now, I am extraordinarily neutral on this pair, foregoing the idea of treating such a risky environment.
Strategy Bearish
Trend
BULLTRAPS shall be used to enter
sudden moves should be monitored with rsi and volume
RSI confirmation:Trend bearish!
Recently, we had been stuck between 0.68 and 0.66 in a relatively well-defined area of consolidation. However, in the last couple of weeks, we have seen volatility pick up quite drastically as we plunged below the bottom of that consolidation, only to turn around and rip above the top of it before pulling back yet again. In other words, the market has completely lost its mind.
You will need to protect yourself if you are absolutely insistent on trading the Australian dollar, which at this point might be a bit difficult to do. Keep in mind that there are some external factors you need to pay close attention to if you are going to try this market, as the Australian economy is almost purely export based.
The Reserve Bank of Australia has recently raised interest rates by 25 basis points out of the blue, the reality is that Austria is still held hostage by global demand for its hard commodities
This is especially true when it comes to the Chinese economy, which of course is the number one export market for Australians. Pay close attention to commodity prices overall because they can give you a bit of a “heads up” as to what’s going to happen with the Australian dollar as well.
A good reference is also to checkout the following charts to understand AUDUSD better
click on the charts below to read the fundamentals and techncial trading,so you will find a symmetrical positive correlation between the 3 assets
China50
Hong Kong 50
On the other side of the equation, you have to pay close attention to the fact that the Federal Reserve is choosing to stay tight with its monetary policy, so that does drive a certain amount of US dollar strength, especially as interest rates in America remain so elevated. Because of this, I think ultimately this pair does fall from here, but it needs to show its hand first. As things stand right now, I am extraordinarily neutral on this pair, foregoing the idea of treating such a risky environment.
Strategy Bearish
Trend
BULLTRAPS shall be used to enter
sudden moves should be monitored with rsi and volume
RSI confirmation:Trend bearish!
Comment:
Dollar Index Hits 14-month Low
DXY decreased to a 14-month low of 100.61
Wall Street Rallies after Softer Inflation
US stocks surged on Wednesday after both headline and core inflation fell more than expected in June, reinforcing the view the Federal Reserve may stop the tightening campaign sooner than expected. The Dow Jones gained around 250 points to 34548, the highest level since November last year, with 3M and Goldman Sachs up nearly 2% and among the top performers. The S&P 500 added 0.9% 4477, a level not seen since April of 2022, led by shares in the consumer discretionary, tech and real estate sectors. The Nasdaq was up about 1.2% to 13906, also the highest since April last year. Traders are currently pricing in a 92% chance for a 25bps increase in the fed funds rate this month, while the odds for another quarter-point hike in September fell to 13% from 20% before the CPI release and in November eased to 26% from 34%.
Brazil Business Morale Rises to 8-Month High
The Industrial Entrepreneur Confidence Index (ICEI) in Brazil rose by 0.7 points from the previous month to an eight-month high of 51.1 in July of 2023. This marks the second consecutive month in which the industry has shown confidence, attributed primarily to a more positive evaluation of the current economic conditions (+1.3 points to 45.5). Also, the indicator of future expectations increased (+0.4 points to 53.9), indicating optimism for the next six months.
FTSE MIB Close Rise to 15-Year High
The FTSE MIB index closed 1.8% higher at 28,573 on Wednesday, outperforming other benchmark European indices amid sharp gains for its heavyweight financial sector as markets digested the soft US inflation print. American consumer prices rose by 3% annually in June, below estimates of 3.1%, benefitting from a slowdown in core consumer prices. The development lifted equities amid hopes that the Fed will be able to ease its hawkish pressure. Banks were among the sharpest gainers as BTP yields fell by 15bps, aiding their balance sheet with Banca MPS and Banco BPM both adding more than 2%. In the meantime, STMicroelectronics shares surged 4.8% amid recommendation updates from Jeffries and Citigroup.
DXY decreased to a 14-month low of 100.61
Wall Street Rallies after Softer Inflation
US stocks surged on Wednesday after both headline and core inflation fell more than expected in June, reinforcing the view the Federal Reserve may stop the tightening campaign sooner than expected. The Dow Jones gained around 250 points to 34548, the highest level since November last year, with 3M and Goldman Sachs up nearly 2% and among the top performers. The S&P 500 added 0.9% 4477, a level not seen since April of 2022, led by shares in the consumer discretionary, tech and real estate sectors. The Nasdaq was up about 1.2% to 13906, also the highest since April last year. Traders are currently pricing in a 92% chance for a 25bps increase in the fed funds rate this month, while the odds for another quarter-point hike in September fell to 13% from 20% before the CPI release and in November eased to 26% from 34%.
Brazil Business Morale Rises to 8-Month High
The Industrial Entrepreneur Confidence Index (ICEI) in Brazil rose by 0.7 points from the previous month to an eight-month high of 51.1 in July of 2023. This marks the second consecutive month in which the industry has shown confidence, attributed primarily to a more positive evaluation of the current economic conditions (+1.3 points to 45.5). Also, the indicator of future expectations increased (+0.4 points to 53.9), indicating optimism for the next six months.
FTSE MIB Close Rise to 15-Year High
The FTSE MIB index closed 1.8% higher at 28,573 on Wednesday, outperforming other benchmark European indices amid sharp gains for its heavyweight financial sector as markets digested the soft US inflation print. American consumer prices rose by 3% annually in June, below estimates of 3.1%, benefitting from a slowdown in core consumer prices. The development lifted equities amid hopes that the Fed will be able to ease its hawkish pressure. Banks were among the sharpest gainers as BTP yields fell by 15bps, aiding their balance sheet with Banca MPS and Banco BPM both adding more than 2%. In the meantime, STMicroelectronics shares surged 4.8% amid recommendation updates from Jeffries and Citigroup.
Comment:
YEN Oil AUD NZD Asian stocks fall on bad chinese data
China Industrial Output Growth Beats Estimates
The Chinese economy advanced 6.3% yoy in Q2 of 2023, faster than a 4.5% growth in Q1 but missing market estimates of 7.3%. The latest figures were distorted by a low base of comparison last year when Shanghai and other big cities were in strict lockdown. During H1, the economy grew by 5.5%. China has set a GDP growth target of around 5% for this year after the economy expanded by 3% in 2022 and missed the government's target of about 5.5%. Beijing has shown reluctance to launch greater stimulus, especially as local government debt has soared. In June alone, indicators showed a mixed picture: retail sales rose the least in 5 months, industrial output growth grew for the 14th month, and the urban jobless rate was unchanged at 5.2% but youth unemployment hit a new high of 21.3%. Data released earlier showed shipments from China fell the most in three years, as high inflation in key markets and geopolitics hit foreign demand. A Politburo meeting is expected later this month.
Asian Stocks Fall on Weak Chinese Data
Asian equity markets fell on Monday as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. The Shanghai Composite led the decline, losing more than 1%. The Shenzhen Component, S&P/ASX 200 and Kospi indexes also tumbled. Meanwhile, Japanese markets are closed for a holiday, while Hong Kong markets will likely be closed for the day due to a typhoon.
China Stocks Drop on Weak GDP Data
The Shanghai Composite dropped 1.1% to around 3,200 while the Shenzhen Component lost 0.8% to 10,990 on Monday, giving back gains from last week as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. Meanwhile, China’s industrial production and fixed asset investments increased more than anticipated, while retail sales missed forecasts. Mainland stocks gained last week amid hopes that a faltering post-pandemic recovery would prompt Beijing to offer more pro-growth policy measures. Commodity-linked and financial stocks led the decline, with notable losses from Yunnan Lincang (-3.5%), Zijin Mining (-1.5%), China Shenhua Energy (-4.5%), ICBC (-6%), Ping An Insurance (-1%) and China Merchants Bank (-1.1%).
China Industrial Output Growth Beats Estimates
The Chinese economy advanced 6.3% yoy in Q2 of 2023, faster than a 4.5% growth in Q1 but missing market estimates of 7.3%. The latest figures were distorted by a low base of comparison last year when Shanghai and other big cities were in strict lockdown. During H1, the economy grew by 5.5%. China has set a GDP growth target of around 5% for this year after the economy expanded by 3% in 2022 and missed the government's target of about 5.5%. Beijing has shown reluctance to launch greater stimulus, especially as local government debt has soared. In June alone, indicators showed a mixed picture: retail sales rose the least in 5 months, industrial output growth grew for the 14th month, and the urban jobless rate was unchanged at 5.2% but youth unemployment hit a new high of 21.3%. Data released earlier showed shipments from China fell the most in three years, as high inflation in key markets and geopolitics hit foreign demand. A Politburo meeting is expected later this month.
Asian Stocks Fall on Weak Chinese Data
Asian equity markets fell on Monday as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. The Shanghai Composite led the decline, losing more than 1%. The Shenzhen Component, S&P/ASX 200 and Kospi indexes also tumbled. Meanwhile, Japanese markets are closed for a holiday, while Hong Kong markets will likely be closed for the day due to a typhoon.
China Stocks Drop on Weak GDP Data
The Shanghai Composite dropped 1.1% to around 3,200 while the Shenzhen Component lost 0.8% to 10,990 on Monday, giving back gains from last week as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. Meanwhile, China’s industrial production and fixed asset investments increased more than anticipated, while retail sales missed forecasts. Mainland stocks gained last week amid hopes that a faltering post-pandemic recovery would prompt Beijing to offer more pro-growth policy measures. Commodity-linked and financial stocks led the decline, with notable losses from Yunnan Lincang (-3.5%), Zijin Mining (-1.5%), China Shenhua Energy (-4.5%), ICBC (-6%), Ping An Insurance (-1%) and China Merchants Bank (-1.1%).
There were no economic indicators this morning to shift investor sentiment.
However, monetary policy divergence remains in favor of the dollar following Fed Chair Powell’s two days of testimony.
It is a quiet start to the week for the AUD/USD and NZD/USD. There are no economic indicators from Australia or New Zealand to move the dial.
While investors will try to claw back losses from last week, the theme remains the same. Market angst over the economic outlook for China and a hawkish Fed monetary policy outlook remain headwinds for the Aussie and the Kiwi.
Looking forward to the US session, there are no US economic indicators to influence. The lack of economic indicators will leave the pairs in the hands of Fed chatter. Hawkish chatter would pressure the pairings through the afternoon ahead of influential US stats this week.
This morning, bets on a July Fed interest rate hike remained elevated despite manufacturing sector woes. According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 71.9% versus 74.4% one week ago.
Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 10.1%, up from 8.9% one week earlier. This could change materially with the Core PCE Price Index numbers out on Friday.