AUD/USD: 0.7150EUR/USD: 1.1600It was a session for the history books today, with US equities sharply lower and with the DJI having its biggest fall ever. Panic spread through the market that China may be slowing further than had previously been envisaged, leading Chinese and global equities strongly lower and we can possibly expect more of the same today, so all eyes will again be on China after yesterday’s 8.5% drop. In the currencies the Yen and the Euro led the way as the US$ took a big hit, although not as big as the commodity bloc which saw algos/stops send both the Aud and Kiwi sharply down before a partial recovery. Economic data will be largely sidelined, but for the record today sees the German Q2 GDP, German IFO Business Climate/Expectations, US Case Schiller House Price Index, Markit US Composite/Services Flash PMIs, Consumer Confidence, Richmond Fed Mfg Index, New Home Sales Change. Asia will watch the China Leading Economic Index, but most eyes will be on the Shanghai Index.
Having made new trend lows of 0.7200 in Asia the Aud got clobbered once again when the US session got going and followed equities lower, briefly collapsing to a low of 0.7037 before an equally swift recovery, to currently sit at 0.7160.
Next up, who knows? Not me that is for sure, although I would not wish to be long given the general feel of the market and the possibility of further panic in China.
A return to the session lows is possible, below which would see a run to 0.7000 and lower, where the next support would arrive at 0.6952 (April 2009 low). Although it was broken earlier in the session, we are currently sitting on the long term rising trend support from the Sept 2001 lows and this may provide support today (see monthly chart below). Should the trend support hold then look for a bounce towards the 0.7200 area, and perhaps to the session high at 0.7310? This looks highly unlikely but these are volatile days so be careful. If the Chinese authorities come in to underpin the market, we could be in for a sharp rally, so stay alert!
Economic data highlights will include:
CB Leading Indicator, China Leading Economic Index.
Jim LanglandsFX Charts
