Shanghai Composite Index continues to look vulnerable

Global Markets: Confusion rippled through the markets on Friday after an unimpressive headline NFP figure inspired USD strength. Due to the unclear Federal Reserve US interest rate expectations, the USD is continuing to trade with sensitivity and any positive news from the US economy could install a bullish rally. Although the headline NFP number wasn’t great, the improvement in wage growth and unemployment rate falling to 5.1% impressed investors. Today, the focus is back on the Shanghai Composite Index which looks set to close just over 1% lower despite trading 0.9% higher only an hour ago.

It is possible that the closure of the Shanghai Composite Index last Thursday and Friday due to the World War II 70th anniversary commemorations enabled policymakers in China to get together in an attempt to stabilize the China markets.

The latest China trade balance will be released on Tuesday and may shed more light on the damage the slowdown of its economy has had on its exports and imports. Market participants will also be monitoring the latest China inflation data, which if printed below expectations at 1.9% will highlight further weakness in the economy. Any negative data will expose the China markets to further periods of heavy pressure.

Taking a look into the commodities arena, Gold caught my interest in the first week of September. The global decline of commodities imbued with the appreciation of the USD has dished this yellow metal selling pressure. If the Federal Reserve raise US interest rates later this year as many still expect, this would likely be the catalyst for a heavy selloff. Commodities currencies such as the CAD, AUD and NZD still remain fundamentally bearish and are exposed to more losses this week, especially if the China economic data exposes further pressure in the commodity markets.

Focusing on today, there is no major economic releases scheduled and because of this, the limelight remains on the developments in China.

GBPUSD

GBP weakness caused by the risk-off trading environment has made the GBPUSD bearish on the daily timeframe. The candlesticks reside below the 20 SMA and the MACD has crossed to the downside. Previous support at 1.5200 may become resistance, which may send prices to the next relevant support at 1.5100.

GBPCHF

This pair is technically bearish. Since the hefty decline in the final weeks of August, prices have ranged with support at 1.4650 and resistance at 1.4900. A solid breach below the 1.4650 may open a path to the next relevant level at 1.4450.

GBPJPY

The risk-off environment has provided the JPY with consistent strength. GBPJPY remains bearish as long as prices can keep below the previous lower high of 184.50. The old support at 181.50 may act as new resistance which may send the GBPJPY to 178.50. Leading and lagging indicators concur with this scenario as they point to the downside.

GBPCAD

The falling prices of oil has promoted CAD weakness, some weakness may be seen on the GBP due to the risk-off environment. The GBPCAD may turn technically bearish on the daily timeframe once a solid daily close below the 2.010 support is achieved. A move back above 2.050 invalidates this daily bearish outlook.

GBPAUD

AUD weakness is apparent due to the global decline in commodities. Technically the GBPAUD is bullish. Prices are above the 20 SMA and the MACD has crossed to the upside. As long as the 2.150 support holds, there may be a further incline to the next resistance at 2.210.

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