Shanghai Composite meanders back into the green

The China episode continues as the Shanghai Composite Index migrates into positive territory, with the major market concluding trading +1.89% higher. Sentiment for the China markets still remains bearish as finance luminaries have criticized President’s Xi Jinping’s management for what they characterize as a series of inept and potentially detrimental attempts to sustain the Chinese nation’s equities and economy.

The focus for Asia this week remains on the China flash PMI on Wednesday for which a reading of 47.5 has been estimated for September. With the manufacturing industry in China already in a period of contraction, a release which is below the expectations may expose the China markets to further weakness and vulnerability.

According to Chinese State Councilor Yang Jiechi, the Chinese stock markets are not a reflection of the health of the world’s second largest economy. He stated the concerns were overblown and just like Premier Li Keqiang, remained defiant that China would retain its 7% growth target which would be the engine for global expansion. In contrast, recent data from China has continued to outline nothing other than a deep economic downturn with the additional fears that the China data is much weaker and erratic than official statistics depicts. A China PMI that prints below expectations may induce further weakness in Asia which may threaten the US equity stock markets which as of writing closed in the red territory on Friday.

A drop in US oil inventories last week inspired WTI bulls to breach the $47.50 level before gains were surrendered as prices returned back to the $44 regions. Despite the upsurge, prices still continue to retain stability with support at $44 holding quite well. OPEC forecasted WTI to return back to $80 by 2020 but as of now the commodity continues to wait for the next relevant release or event to determine which direction the price is going to next. The next major catalyst which may lead to a sizable move within WTI may be a reduction in demand following global growth concerns.

The focus today remains on the speech by FOMC member Lockhart this evening. Fed member Lockhart is considered dovish and if there is a Q&A session from the audience, then attention may be on any additional information about last week’s message from the FOMC.

EURJPY

The EURJPY is in the process of turning bearish on the daily timeframe. The bearish engulfment experienced in Friday’s session may provide the EURJPY bears the foundation needed to breach the 135.50 support. A solid daily close below 135.50 may open a path to the next relevant support at 133.50. A move back above 137.33 invalidates this daily bearish outlook.

GBPCHF

The GBPCHF remains in a period of consolidation with support at 1.4900 and resistance at 1.5100. Prices are trading above the daily 20 SMA but the MACD is currently looking flat. The breakout/down strategy remains valid on this pair. A breakdown below the 1.4900 support may open a path to the next relevant support at 1.4650.

CADJPY

The CAD still remains under pressure due to the decline in commodity prices. The CADJPY remains technically bearish on the daily timeframe as long as prices can keep below the 92.50 resistance. The lagging indicators show conflicting signals with the MACD trading to the upside but prices being above the daily 20 SMA. A solid breakdown below 89.50 may be needed for the bearish trend to resume.

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