Asian Stocks Talking Points:
- Asian shares lower following Wednesday’s Fed rate hike, Australian Dollar down
- Chinese data fell short, stocks and the Euro await the ECB rate decision ahead
- ASX 200 is testing short-term ascending channel support. Will it resume its decline?
Find out what retail traders’ Equities buy and sell decisions say about the coming price trend!
Asian shares were down and in the red by Thursday afternoon trade as expected, echoing declines from the US session. There, the Fed raised rates for a second time this year and signaled two more that are on their way by year end. Signs of tightening credit conditions from the world’s largest economy also has knock on effects for lending conditions around the globe. This bodes ill for economic growth and thus, hurts stocks.
Japan’s Nikkei 225 was down almost by a half of a percentage point. In China, the Shanghai Composite declined about 0.28 percent. Australia’s ASX 200 did not quite suffer as much, falling about 0.14 percent.
Things were the dimmest in South Korea, where the KOSPI declined about 1.57 percent. Comments from US Secretary of State Mike Pompeo seemed to have further dampened sentiment in the area.
Mr. Pompeo said that North Korean sanction relief won’t happen without denuclearization. This followed yesterday’s summit between US President Donald Trump and North Korea’s Leader Kim Jong-un. His comments seemed to run counter to the North’s suggestion that the United States would start easing penalties.
On the currency side of things, the Australian Dollar brushed off a rather disappointing local jobs report. The currency was quick to pare loses until a slew of worse-than-expected Chinese data crossed the wires, then it resumed its decline. In short, Chinese industrial production and retail sales clocked in at 6.8% and 8.5% y/y in May versus 7.0% and 9.6% estimated respectively. For full details, see the calendar below:
DailyFX Economic Calendar (All times listed in GMT)
Since China is Australia’s largest trading partner, economic performance in the former can have knock-on effects on the latter. This can in turn impact the path for monetary policy from the Reserve Bank of Australia, thus affecting the Aussie Dollar. Amidst the decline in stocks, the anti-risk Japanese Yen appreciated against its major counterparts.
From here, all eyes turn to Thursday’s European Central Bank rate decision. Here, there is scope for Euro losses as anticipation for a definitive taper to QE opens the door for disappointment to the contrary. In addition, signs that stimulus may stay for longer or even be reduced at a slower pace could have some room to bolster stocks unlike the Fed.
ASX 200 Technical Analysis: Heading Lower?
On a daily chart, the ASX 200 is right on the lower line of a short-term ascending channel. While there may be a breakout lower ahead, resumption of its descent seen in most of May would require some confirmation via daily closes lower. From here, a push lower exposes the 38.2% Fibonacci retracement at 5,951. On the other hand, an ascent places the 14.6% minor level at 6,075 as the next target.
ASX 200 Trading Resources:
— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
Bitcoin Net-Longs Slide Into 1-Month Lows
Bitcoin Net-Shorts 5.2% Higher Since Last Week
Bitcoin: Retail trader data shows 76.8% of traders are net-long with the ratio of traders long to short at 3.3 to 1. The number of traders net-long is 1.1% lower than yesterday and 8.0% lower from last week, while the number of traders net-short is 0.5% lower than yesterday and 5.2% higher from last week.
Be sure to check out our Bitcoin Trading Guide if you’re new to cryptocurrencies!
Bitcoin Net-Long Dip Indicate Bullish Bias
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.
— Written by Yayati Tanwar, DailyFX Research
Canadian Dollar (CAD) Eyes Latest Inflation Report
Canadian Dollar Price, News and Analysis
- Inflation expected unchanged, but any uptick could seal another rate hike in October.
- Canadian economy continues to grow strongly.
Canadian Dollar May Receive a Boost on Latest Inflation Report
The Canadian dollar is currently treading water ahead of the July CPI report with the market expecting a 0.1% month-on-month rise and a 2.5% annualized reading, both unchanged from last month’s strong report. Canadian CPI grew at its fastest rate in over six years in June, due to higher energy prices, and another strong reading today will increase pressure on the Bank of Canada to hike rates again, probably at the October meeting. The central bank has already hiked rates by 0.25% twice this year and by a total of four times in the last 12 months. Last week data showed Canadian unemployment falling to 5.8% from a prior 6% while employment grew by 54.1k against expectations of 17K and a prior month’s 31.8k.
USDCAD has remained in a 1.2950 – 1.3200 range over the last month, despite the strength of the US dollar and fears over the NAFTA negotiations. The pair currently trade at 1.3130, just above 23.6% Fibonacci support at 1.3118 and below the July 24 high at 1.3192. An inline or slightly stronger-than-expected reading would seal another 0.25% rate hike and see USDCAD break lower with the 38.2% Fibonacci retracement at 1.2952 the short-term target. A weaker-than-expected reading today would see the July 24 high under pressure.
We have recently released our Q3 Trading Forecasts for a wide range of Currencies and Commodities, including the Canadian Dollar.
USDCAD Daily Price Chart (January – August 17, 2018)
— Written by Nick Cawley, Analyst
To contact Nick, email him at email@example.com
Follow Nick on Twitter @nickcawley1
USD/CNH & Gold Price Action Point to Reversals Gaining Traction
Gold, USD/CNH Technical Highlights
- Gold price reversal and sentiment supportive of a low
- Correlation between Gold & CNH extremely high
- USD/CNH reversing hard from near Dec ’16 peak
For an in-depth intermediate-term technical and fundamental outlook, check out the Q3 Gold Forecast.
Gold price reversal and sentiment supportive of a low
On Wednesday, we were discussing the oversold, overly bearish backdrop in gold, but that first we needed to see some type of swift flush and reverse or something of that nature before looking for a low. We didn’t have to wait long, as the past few sessions qualified as flush-and-reverse price behavior, with silver, unsurprisingly and in silver-like fashion, displaying even more capitulation-like behavior, shedding 3 of its 4% in an hour on Wednesday.
As long as gold & silver can hold onto yesterday’s lows on a closing basis, we’re looking for at least a rebound back to the point of origination of the most recent leg lower (~1210 & 15.30). If another leg lower develops we’ll have to reassess.
Check out the IG Client Sentiment to see how other traders are positioned and why it can be used as a contrarian indicator.
Gold Daily Chart (Flush & Reverse)
Correlation between Gold & CNH extremely high
If gold is reversing then so is CNH and vice versa. Gold and CNH have a 3-month correlation of 97%. They are effectively the same market at this juncture. How one plays it is up to the instrument of choice, but be mindful of total risk if trading both.
Gold/CNH Daily Chart (97% 3-mo Correlation)
USD/CNH reversing hard from near Dec ’16 peak
USD/CNH is in the process of carving out a weekly key-reversal bar just shy of the December 2016 high, assuming it doesn’t post a big rally from here. Trade a little higher today or lower and the reversal currently in place will stand as confirmed.
The candle development along with a break in the upward channel on the daily time-frame should usher in more selling, and perhaps in swift fashion. Looking lower, there are minor levels along the way that were carved out as the channel matured, but the broader target is the bottom of the upward grind since last month, right around the 6.60 mark.
USD/CNH Weekly Chart (Key-reversal nearly complete)
USD/CNH Daily Chart (Channel break to send it lower)
Resources for Forex & CFD Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
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