China’s economy reimbursed with further pressures

Global Markets: The markets have woken up to another morning of woes over the China economy, as data released over the weekend pointed towards further signs of weakness for the Chinese economy. Most market participants were already concerned about the slowing rate of growth in the world’s second largest economy, and the annualised Industrial Production data failing to meet expectations will further concerns. Not only was the figure at 6.1% lower than expected, but growth in fixed-asset investment is now reportedly at its weakest in 15 years. With such weakness being seen across large sections of the Chinese economy, the China markets are going to remain exposed to pressures and it is likely the government will remain on high alert to relieve pressures and induce stability in the domestic markets.

Although Premier Li Keqiang remains defiant that expectations of a 7% growth rate for China is achievable, the recent data from China has outlined nothing other than a deep economic downturn and there are already fears that the China data is much weaker than official statistics illustrate. These fears have translated back to the Shanghai Composite Index which after a week of meandering between gains and losses has been exposed to further weakness. As of writing the Shanghai Composite has declined the most in three weeks, trading -3.37% lower, whilst the Nikkei255 follows the same pattern also trading in red territory. This market weakness from Asia will most threaten both the European and US equity markets.

The continued signs of economic weakness in China will add to further calls for a possible US interest rate rise this week to be delayed. Even when you remove the China risks from the equation, the data dependent requirements for a US interest rate rise this month have not been encouraging. While there is nothing worrying about the US economic data, the last two NFP results have not got the markets excited and the Fed might want to see further improvement in the labour market before beginning rate rises.

Focusing on today, there are no major economic data releases. With this being the case, the main focus will be on how the markets digest the data from China.

EURJPY

The EURJPY is in a correctional phase with price currently residing around the 61.8% Fibonnaci level of the initial down move which commenced on the 25^th of August. As long as the 137.00 resistance holds, the next relevant support which prices may decline back to will be the 135.50.

CADJPY

The declining prices of oil have put pressure on the CAD. The CADJPY is fundamentally bearish on the daily timeframe. The MACD trades to the downside and prices are below the daily 20 SMA. As long as resistance holds at 92.50, then there may be a further decline to the 89.00 support.

GBPJPY

This pair has undergone a strong corrective period and currently resides under the daily 20 SMA. The MACD still trades to the downside with 188.00 providing a strong level of resistance. As long as this level holds, the GBPJPY may decline to the next relevant support based at 184.50.

AUDJPY

The global decline of commodity prices has put pressure on the value of the AUD. This pair remains bearish on the daily timeframe as long as the 87.30 resistance hold. Prices are trading below the daily 20 SMA and the MACD is trading to the downside. The next relevant support will be 82.00.

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