25 August, 2015
The EUR is trading lower this Tuesday after a nearly +340 pip move with the main cause pointing to Chinese retail investors’ realization that their government is no longer willing to support the Chinese stock markets. Monday’s aggressive global stock market sell-off was amplified by a number of brewing factors, the devaluation of the Yuan, the collapse of commodity prices, and the uncertainty of when Central banks will start to tighten rates.
At the moment, the EURUSD is at risk of a retracement of the 1.1020-1.17 sharp multi up-day move. However, the EURUSD saw serval breaks of resistance that could lead to further positive upward momentum on price. Traders should now be on alert if the former 1.1530 resistance now turned support can hold before initiating new longs, otherwise a possibility dip towards the mid 1.13’s could see buyers remerge to support price for a potential next leg higher move above the 1.1750’s.
The German DAX remains clearly below the 10000 mark and Asian markets were volatile in overnight trade, with the ASX closing higher, but the Nikkei losing nearly 4% again.
Crude Oil touched $37.70 after making it to $39’s following its entry into to the $37‘s. The slide lower comes as traders fear that global stock markets may pick up downward momentum again; the price fall indicates that traders view that global demand for the commodity will weaken as the Chinese economic slowdown takes hold.
The White House said the Treasury is “closely monitoring” global markets and China should continue to pursue reforms, while touting the strength of the U.S. economy. However, it did warn that Congress needs to pass the budget and avoid shutdowns to avoid “self-inflicted wounds”. Merkel of Germany said that a crisis in China won’t last and it will do everything it can to stabilize the situation, while Hollande of France said China will find the right answers to secure its economy.
Currency Pairs, Grouped Performance (% change)
Current intraday percentage change of currencies against other major currencies since the daily close 23:59:59 server time.
The JPY is lower against the majors after the JPY showed strong gains as a safe haven currency during yesterday’s volatile trading session. The USDJPY bounced nearly 300 points from the lows, as Wall Street pares its losses; USDJPY touched 119.02 highs after collapsing from over 120.00 to nearly 2015 lows of 116.15. The AUD is trading higher as commodity prices will continue to dictate the level of the AUD. The EUR is trading mixed after the German Ifo index rose to 108.3 in August from 108.0 in July.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
• EUR German IFO Index: rose to 108.3 in August from 108.0 in July. This was even stronger than consensus forecast, with markets looking for a correction, although the rebound in German PMIs and strong orders already suggested that the Ifo would hold up. The breakdown confirmed that the improvement was entirely due to a jump in the current conditions indicator, while the more forward looking expectations index fell back slightly to 102.2 from 102.3 in July. The deteriorating growth outlook in China and other emerging markets may not have had an immediate impact on this month’s reading, but will be felt in coming month. Bund futures extended losses on the stronger than expected number, with the September contract now down 90 ticks on the day.
• USD Consumer Confidence : August Consumer Confidence is expected to increase to 92.0 from 90.9. This compares to a recent low of 25.3 in February of 2009. Forecast risk: downward, given the decline in the first Michigan release. Market risk: downward, as weaker data could impact rate hike timelines.
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