Chinese Equity Futures Plunge 10% In Thin Liquidity Conditions
Swissquote Bank Ltd | May 31, 2016 07:18AM ET
Market Brief
After a very quiet Monday due to a bank holiday in UK and Memorial Day in the US, volatility picked up in Asia on Tuesday. The biggest move came from the Australian dollar, which rose 0.82% against the US dollar after data showed that lending to Aussie companies increased by 7.1%y/y in April, the biggest increase since 2009. The jump in business lending revives hopes that the economy can finally reduce its dependence on the mining sector as it rebalances towards the other sector. AUD/USD tested 0.7251 in Sydney and consolidated slightly lower at around 0.7240. On the medium-term, the technical structure continues to suggest further downside potential. A move above its 200dma, currently lying at 0.7455 would allow the currency pair to put an end to the negative momentum.
The New Zealand dollar was the second best performer as it surged 0.50% against the greenback amid a surge in business confidence in May. The gauge climbed to 11.3 from 6.2 in the previous month. The report also showed that inflation expectations fell slightly in April from 1.42% to 1.40% in the previous month. NZD/USD rose from 0.6689 to 0.6731 in Wellington and stayed above its 200dma currently at 0.6658. On the upside, the nearest resistance lies at around 0.68-0.6832 (psychological level and 50dma), while on the downside, the 0.6658 will continue to act as support.
In Japan, the yen consolidated previous gains in spite of the release of solid data from the industrial sector. Industrial production rose 0.3%m/m in April (preliminary figures), beating median forecast of -1.5% but below previous month’s reading of +3.8%m/m. Vehicle production contracted 9.7%y/y in April, while small business confidence eased to 45.6 in May from 47.8 a month earlier. Finally, construction orders contracted 16.9%y/y in April after rising 19.8% in March. All in all, the currency pair seems to be insensitive to any kind of economic data from Japan, good or bad, but reacts only to the release of economic indicators from the US and central bank announcements (Fed and BoJ). USD/JPY is currently trading at 111.25. Buying pressure continues to build up with the 112 level as next target.
In the equity market, Asian indices are set to close in green for the second straight day with the Japanese Nikkei and Topix up 0.98% and 1.01% respectively. In China, the CSI 300 was up 3.11% in spite of a sharp plunge of 10% in index futures. The price bounced back to its previous level in less than a minute. Offshore, the Hang Seng was up 1.39% and the Taiex was flat. European futures are trading in positive territory but buyers are a little shy this morning.
Today traders will be watching unemployment rate from Germany and the euro zone; CPI from the euro zone and Italy; GDP from Italy; trade balance from South Africa; personal income and spending, PCE deflator, consumer confidence, Dallas Fed manufacturing index and Chicago purchasing manager index from the US; GDP from Canada.
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Currency Tech
EUR/USD
R 2: 1.1349
R 1: 1.1243
CURRENT: 1.1136
S 1: 1.1058
S 2: 1.0822
GBP/USD
R 2: 1.4969
R 1: 1.4770
CURRENT: 1.4636
S 1: 1.4404
S 2: 1.4300
USD/JPY
R 2: 113.80
R 1: 111.91
CURRENT: 111.14
S 1: 108.23
S 2: 106.25
USD/CHF
R 2: 1.0257
R 1: 1.0093
CURRENT: 0.9915
S 1: 0.9872
S 2: 0.9751
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