The soft manufacturing data from China sparked market mayhem today, driving global equities and oil sharply lower. Currencies were mixed, with the US$ generally, and the commodity bloc in particular, under pressure. It could be a similar story today and it will be another session of watching how Chinese markets react to the selloff. The Australian Q2 GDP will be the initial focus todayand then later the EU PPI, US Factory Orders and ADP Employment figures. It looks as though the extreme volatility could be with us for a while, so keep stops tight.
The RBA announcement of rates staying unchanged initially had little effect on the Aud yesterday although bear pressure began to assert itself in European trade and this has continued more or less unabated on the back of Chinese reduced growth/demand concerns, sending AUDUSD down to the base of the wedge formation, having currently seen a low of 0.7015.
Option related buying ahead of 0.7000 has so far stemmed the slide but the bounce has been more or less non-existent and today’s Q2 GDP (exp 0.4%qq, 2.2% yy) could well see a stronger test of the downside where the April 2009 low at 0.6855 would eventually come in play. There is not a whole lot ahead of that to hold the Aud up, so be wary of a quick move lower if/when 0.7000 gives way.
Offers will arrive at 0.7050, 0.7070 and at 0.7100, which currently looks too far over the horizon given the negative look of the short term indicators. If wrong, further gains could eventually take the Aud back towards the multi-year year trend line that was broken last week, at the end of the month, at 0.7130. Beyond this looks unlikely but it is possible that we could yet see a squeeze back to the top of the descending wedge formation, currently at around 0.7200.
Economic data highlights will include:
GDP, TD Inflation.
Jim LanglandsFX Charts
