Chinese Stocks Down Again, Aussie Consolidates

Quick Recap

There is nothing like the threat of a regulatory review to spook markets that know they are on borrowed time. So it is with Shanghai down again today (0.96%) – for the fourth day in a row – as margin rules are about to be audited. It’s kept Hong Kong marginally in the red again but Tokyo and Sydney are doing well.

In forex land the Aussie dollar has consolidated after last night’s big dip down to a low around 0.7720 as the US dollar gives back a little ground both in currency and gold markets.

Tonights US Q4 GDp is the key for where things settle for week’s end.

Looking Deeper

Last night’s falls in the Aussie and Gold were fairly brutal in the scheme of things but in 2015 that’s what trading is all about. We are seeing average true ranges, my favourite trading vol measure elevated and at the highest level we seen for more than a year or more in the big liquid currencies.

This is both a cause of the moves and a result of them. Cause because the SNB has spooked people in holding smaller positions with less conviction and result because this becomes a spiral as smaller positions held with less conviction then lead to more volatility.

It’s a reminder for traders that we are all first and foremost risk managers and managing our capital and staying in the game is the key to success.

Turning to fundamentals before we head to the charts the markets are expecting that Q4 GDP in the US will decelerate to 3.3% annualised from the 5% pace of Q3 2014. That’s a huge stepdown in economic momentum but to the extent that is the market expectation, and thus baked in the cake, then only a big deviation will get things moving.

But the nature of US reporting of GDP, in so far as it is annualised, means the chances of a big miss are high. No idea which way but it may offer trading opportunities later tonight.

But in the mean time as we highlight each day in the section below the charts help give us a roadmap each night.

S&P 500 – what a market: the overnight low of 1,989 was back in the 1,985/90 support zone so “the force is strong” in this trend.

To reiterate what I said yesterday.

“Two things are clear for the moment however. 1) that the crude uptrend in terms of two moving averages continues as it has for 3 years now and 2) in the short term if 1,985/90 breaks and closes on a weekly basis a run to test 1,915/25 may be in the offing.”

EURUSD – I retain a bias for a topside break while above the recent lowand am targettting 1.1430/50 in the short term

Euro will struggle to break this zone but if it can then a rally toward 1.1490/1.15 and then 1.17 could be on the cards.

AUDUSD – crash, bang, wallop:  The AUD made a low of 0.7720ish overnight just around 25 pips above the -38.2% and wave 5 target of the recent move.

I’m a buyer down here with as top at 0.7687 looking for a bounce.

USDJPY – boring: USDJPY is still in a mini-range within a range. It’s actually a lesson in how important trendlines and patterns can be for traders.

Very short term it;s 118.40/60 topside and 117.15/30 bottom side

Longer term the 115.50/80 level remains is the key to whether or not USDJPY heads below 110 while the top of this little pennant is 119.44.

GBPUSD: GBP looks better than EURUSD on the charts but with the same pattern and better fundamentals in so far as the BoE is moving toward tightening.

The target is 1.5283 and 1.5415 while above 1.4987.

GOLD – The target level and TP on 50% of position (instituted at $1,292) of $1265/7 was triggered overnight. It’s holding above the 200 day moving average but $1,247 and perhaps even $1,226 is a chance given the setup.

The Scorecard

Again Singapore and Sydney as is the Nikkei in Tokyo but Shanghai is dragging its heals and Hong Kong lower.

Here is the scoreboard around the region at 5.15am London, 2.15pm Tokyo and 4.15pm Sydney

• Tokyo (Nikkei Average) up 0.75%, 132 points to 17,738
• Hong Kong (Hang Seng Index) down 0.11%, 26 points to 24,570
• Shanghai (Shanghai Composite Index) down another 0.96%, 31 points to 3,231
• Sydney (ASX 200) up 0.3%, 18.8 points to 5583.3 – weaker than futures indicated this morning .

On Currencies and Commodities

• EURUSD – 1.1322
• GBPUSD – 1.55070
• USDJPY – 118.03
• AUDUSD – 0.7786
• Gold – $1,261
• Dalian Iron Ore Futures –  4 73(May 2015)