FXStreet (Mumbai) - Volatility is seen picking up pace in the Asian session as risk-aversion grips the financial markets amid escalating tensions over China slowdown following the recent spate of sluggish Chinese data. Asian equities accelerate losses while JPY, EUR, CHF benefit from the increased bids for safe-havens.
Key headlines in Asia
Asian stocks turn lower on China woes, Fed uncertainty
China: Weaker growth calls for fiscal stimulus - Nomura
ECB QE flexibility credit positive - Moody's
Dominating themes in Asia - centered on JPY, AUD, NZD
With risk-aversion back in vogue in the Asian session, Asian traders run for safety-cover as a sudden bout of selling in higher yielding/ riskier assets dampened investors’ sentiment.
Growing concerns over Chinese economic prospects re-ignited by the recent Chinese macro data released over the weekend spooked markets, resulting in falling stocks on the Asian bourses and higher demand for safe-haven assets.
The Japanese yen enjoys solid gains against the US dollar as risk-off intensifies, with the traders also remaining cautious ahead of Tuesday’s Bank of Japan (BOJ) decision. USD/JPY eased-off highs near 120.80 levels and now mires near lows around 120.30, recording a -0.20% loss so far.
The Antipodean currencies also gave away gains and receded from highs, with the Aussie now trading almost unchanged near 0.7090, fading the recovery from 0.7140 highs. Moreover, AUD traders also await fresh insights from the RBA meeting minutes due to tomorrow for cues on the currency levels and future course of the monetary policy. While the Kiwi also trades muted above 0.63 handle, erasing early gains on the back of reducing demand for higher yielding currencies.
Meanwhile, the Asian markets keep falling amid renewed China fears, with the Japan’s benchmark index, the Nikkei, losing -1.5% and trades around 18,000. While the Hong Kong's benchmark Hang Seng index drops -0.30% to 21,440 and the Shanghai Composite extends declines to 3,095, -3.20% on the day. The benchmark Australian S&P/ASX 200 ditched its other Asian rivals and gains 0.37% to 5,086.
Heading into Europe - centered on EUR, GBP
A data-light European session ahead to kick-off an eventful week for the EUR, GBP traders with only the Euro zone industrial production data to garner some attention.
Industrial production in the euro zone is seen as advancing 0.2% month-on-month in July, following a 0.4% decline reported in June, while growing 0.5% when measured annually, compared to a 1.2% gain recorded in the sixth month of 2015.
Apart from economic data flow, the Greek election campaign events enter their final week before the September 20 parliamentary elections. Leaders of Greece's two biggest political parties, Alexis Tsipras and Evangelos Meimarakis, will attend the last televised debate before the vote.
Looking ahead, we have an absolutely empty US macro calendar tonight, with markets now turning their attention towards Tuesday’s retail sales and industrial production data from the US for fresh cues on the USD moves.
EUR/USD Technicals
Valeria Bednarik, Chief Analyst at FXStreet explains, “Technically, bulls continue dominating the pair, as the daily chart shows that the rally extended well above its 100 DMA in the 1.1100 region, whilst the 20 SMA heads higher around 1.1275, reinforcing the static support placed at 1.1282, the 61.8% retracement of its latest bullish run. In the same chart, the Momentum indicator is around its 100 level with a sharp upward slope, whilst the RSI indicator heads higher around 59.”
“In the 4 hours chart the price is also above a bullish 20 SMA, although the technical indicators have lost upward strength and turned flat, with the RSI at 70. The immediate resistance comes at 1.1365, the 50% retracement of the same rally, with a break above it favoring a steady continuation towards the 1.1440/50 price zone.”
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