China trade data dampens global sentiment

Markets are waking up to further concerns over the ongoing decline in economic momentum for the Chinese economy following another batch of weak data from China in the early hours of this morning. China data is continuing to follow a downwards trajectory and another noticeable decline in both exports and imports has reinforced these concerns. While some could say that imports exceeded expectations at -5.6% this still illustrates that China is importing less from overseas and once again confirms to investors that it is those economies that are reliant on trade from China that will also suffer the fallout from a decline in China trade. With the trade data outlining further economic weakness in China, sentiment remains bearish for the Chinese economy and these concerns could elevate further ahead of the China CPI report which will be released on Wednesday morning.

During today’s European trading session, the latest manufacturing production data will be released from the UK economy and a positive number will allow some upside momentum for the GBP. The Sterling is trying to recover losses at present but with that being said, sentiment remains bruised and the clear resistance and hesitance from the Bank of England (BoE) towards even mentioning raising UK interest rates will limit investor attraction. For an extended period of time the Sterling has fallen victim to the BoE’s clear resistance towards raising UK interest rates and while it is visible that stagnant inflation is mitigating any pressure on the central bank to act, this is also contributing to the factors behind the repeatedly pushed back UK interest rate expectations.

Despite the aggressive appreciation experienced in the GBPUSD late last week, the pair is still bearish. The lingering concerns over a potential slowdown in economic momentum in the UK economy, mixed with the BoE’s clear hesitance towards raising interest rates holds the potential to encourage sellers to attack the GBPUSD and push prices back towards 1.49.

From a technical standpoint, the GBPUSD remains bearish on the daily timeframe as last week’s rebound offered the opportunity for sellers to push prices back lower. Prices have respected the downwards trend channel with the next relevant level based at 1.4900.

Commodity spotlight – Gold

Gold experienced an aggressive appreciation on Friday despite the impressive NFP which reinforced the growing optimism around the prospects of a December US interest rate hike. The instability created from the ECB’s under delivery on Thursday which temporary weakened the USD may have been the cause behind the abrupt gains in Gold. Regardless, this precious metal remains bearish and the resumption of Dollar strength should provide the momentum for Gold bears to install another wave of selling momentum throughout metal trading. With the Fed futures market pricing in an 80% chance of a US interest rate rise this month, Gold will be left exposed and vulnerable to pressures.

From a technical standpoint prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. A breakdown below 1063 may encourage sellers to send the metal towards 1046.

NZDUSD

The NZDUSD is currently in a phase of consolidation. Resistance can be found at 0.6750 whilst support at 0.6500. Even though prices are above the daily 20 SMA, a breakout above the 0.6750 resistance is needed to validate a daily bullish outlook.

NZDJPY

This pair is technically bullish on the daily timeframe. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. A breakout above the 83.00 resistance may encourage buyers to send prices towards 84.50.

NZDCHF

The NZDCHF is showing some weakness on the daily timeframe. A breakdown below the 0.660 support may invite an opportunity for bears to drag prices lower towards 0.650.

Lukman Otunuga, Research Analyst at FXTM

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