China shares wiped out 2015 gains as stocks drop 8.5%. A number of currencies in the region also fell to monthly and yearly lows as fears over a global recession continue to emerge. AUDUSD fell to a new one year low, while EURUSD continues its vicious surge towards 1.15. The losses overnight, follow a massacre on Wall Street on Friday, where main indices such as the Dow fell 3.12% and the stubborn S&P 3.18% which also closed under its key support and within official correction territory sending a further selling signal.
At the heart of the selloff are the concerns that China may be slowing down dramatically. The concern has caused a contagion effect with Japans Nikkei down 4% and other stocks markets in the region following suit. Taiwan’s index is down more than 6%, and Hong Kong’s Index more than 4%. Neighboring Currencies such as the Malaysian ringgit dropped 2% today alone. OIL prices tumbled too to $38.95, with the price falling under $40 for the first time since 2009. In this risk averse environment, EUR, CHF and JPY remain the strongest currencies while commodity currencies (NZD, CAD, and AUD) are the hardest hit. With this global turmoil, it is now unlikely that the FED will raise rates in September, something that could lead to more USD weakness, especially against the EUR. We have an empty economic calendar today, so trading will be sentiment driven.
Trading quote of the Day: The Trend is your Friend.
USDCAD
Pivot: 1.3175
Likely scenario: Long positions above 1.3175 with targets @ 1.328 & 1.332 in extension.
Alternative scenario: Below 1.3175 look for further downside with 1.3125 & 1.3055 as targets.
Comment: The RSI is bullish and calls for further upside.
USDCHF
Pivot: 0.9505
Likely scenario: Short positions below 0.9505 with targets @ 0.936 & 0.93 in extension.
Alternative scenario: Above 0.9505 look for further upside with 0.955 & 0.96 as targets.
Comment: The RSI is mixed to bearish.
GOLD
Pivot: 1149
Likely scenario: Long positions above 1149 with targets @ 1168.3 & 1173 in extension.
Alternative scenario: Below 1149 look for further downside with 1142 & 1132 as targets.
Comment: A support base at 1149 has formed and has allowed for a temporary stabilisation.
OIL
Pivot: 40.6
Likely scenario: Short positions below 40.6 with targets @ 38.61 & 38.2 in extension.
Alternative scenario: Above 40.6 look for further upside with 41.8 & 42.6 as targets.
Comment: As long as 40.6 is resistance, likely decline to 38.61.
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