The Shanghai Composite Index has declined for the third day in a row with sentiment remaining bearish for the Chinese economy and this is likely inspiring further declines in other Asian equities today, such as the Nikkei 225 and Hang Seng. The Shanghai Composite Index will be closed on Thursday and Friday due to the World War II 70th anniversary commemorations, which will provide the market with some breathing space after receiving continual punishment over the past couple of weeks. The closure might be used as a period where policymakers in China get together and discuss policy measures that could be taken to stabilize the China markets.
The GBPUSD selling has continued with the pair now dropping to levels not seen since June, as the continual financial volatility and risk-off trading environment weakens the Pound. Market participants will be looking towards today’s ADP employment report for some indications towards what Friday’s NFP number will be. If the report impresses, this could install bullish momentum on the USD and drag the GBPUSD even lower.
The bearish sentiment on the Brazilian Real is continuing with the news from last week that Brazil had falling into a recession weighing further on sentiment, which has already been dragged down by the continuous government protests. The decline in commodities has weighed heavily on the Brazilian economy, but the dramatic currency weakness is also adding intense inflation pressures onto the economy. Speaking of commodities, the falling price of oil is being seen as a primary reason behind the Canadian economy falling into a recession for the first time in around six years. The CAD was already fundamentally bearish, but the news of a recession is going to add further selling pressures. The CAD weakness can be observed with the USDCAD regaining buying momentum.
Another milestone low for the AUDUSD
The AUDUSD has fallen below 0.70 for the first time in around a decade as investors looked unfavorably on the overnight Australian GDP data. The economy expanded by 0.2% in Q2, which is the lowest growth in two years. The GDP report suggests growth has been hit by a decline in mining and construction activity, while there has also been a 3.3% slide in exports. The value of the AUD is expected to decline further in the future and sentiment still remains bearish as the AUDUSD ventures to levels not seen since 2009.
The weakness from the AUD has provided fuel for the EURAUD bulls to potentially trade back to the 1.6580 highs. This market remains bullish as long as prices can keep above the previous higher low of 1.5500 which is also the bullish trend defining level.
Sentiment for the NZD still remains bearish because of the ripple effect coming from the developments in China. The EURNZD is technically bullish and lagging indicators such as the MACD and 20 SMA agree with this statement. Resistance may be found at 1.7950, but a breakout and daily close above this level may open a path to the next relevant resistance at 1.8900. A move back below 1.7250 invalidates this daily bullish outlook.
The falling prices of oil have put pressure on the CAD. The EURCAD is technically bullish on the daily timeframe. Prices have found support above the 1.4700 which is also the higher low. On the condition that the 1.4700 support level holds, prices may trade back to the 1.5500 level.
The Australian economy has taken a hit due to the global decline in demand for commodities. This pair is technically bearish. Prices reside below the 20 SMA and the MACD trades to the downside. As long as prices can stay below the 0.6950 resistance, then there may be a further decline back down to the 0.6535 support.
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