Vulnerability within the Shanghai Composite continues

Despite the positive gains from WTI and the other major markets which concluded last week, China shares have declined again with the benchmark Shanghai Composite Index closing another 0.8% lower. The losses in China overnight have been felt across the board with the Nikkei 225 closing in the red and European markets trading lower. The effects of the slide in the Asian futures arena has trickled down to the European markets today with both the DAX and French CAC currently in negative territory, and US markets also at risk to losses. Today is a bank holiday for the UK, so the FTSE100 is closed.

The China markets remain in a sensitive position and most market participants remain bearish despite the positive swings experienced within the Shanghai Composite Index late last week. The next Manufacturing PMI for China will be released tomorrow morning and while the forecast is already for another contraction, the current bearish sentiment can be reloaded further if this data is worse than already expected. This would translate to risks for more losses in the global markets, stretching as far as European equities, oil and commodity currencies.

Speaking of commodity currencies, the NZD will be exposed to pressure this week. The Manufacturing PMI for China may have a direct impact on the NZD, meaning that a disappointing performance could reinstate bearish pressure on the currency. While some stronger New Zealand data as of late has softened the previous selling momentum, external pressures from China and the global decline in the commodity markets has capped bullish momentum at 0.6750 for the NZDUSD.

Whilst most of the focus will be on the NFP this Friday, tomorrow will be a key day for the AUD. The RBA interest rate decision and minutes release will provide clarity on how the central bank currently views the Australian economy. The continual pressures from China and decline in commodities might also be commented on by the RBA, which would be of interest to traders because any concerns on these issues would naturally weaken the sentiment towards the AUD.

EURJPY
The risk off environment has made the JPY fundamentally bullish. The EURJPY is technically bearish with the previous lower high at 136.50. Prices are currently in a period of consolidation, but a breakdown below the 135.50 support may open a path to the next relevant support at 135.00. The 4 hourly 20 SMA may provide a minor resistance which may help prices trend back to the 135.50 support.

EURAUD
Fundamentally the EURAUD is bullish due to the paradigm shift which has seen the appetite for the EUR increase. Australia still feels the pressures of the developments in China and the global decline of commodity prices. Technically the pair has turned bearish on the 4 hourly timeframe. Prices are trading under the 20 SMA and the MACD has crossed to the downside. The 1.5800 resistance must hold for bears to send prices back to the 1.5575 support.

NZDJPY
Weakness from the global decline in commodities is hurting the sentiment towards the NZD. This pair is fundamentally bearish. Resistance can be seen at 78.80 in addition to a wedge formation. Even though the MACD trades to the downside, prices are currently tangled within the 20 SMA. A breakdown of the wedge will open a path to the 76.50 support. A move back above 78.80 suggests the end of the 4 hourly bearish move.

GBPCHF
With both the GBP and CHF being fundamentally bullish, this is a tug of war. Technically a trend shift may be in play on the 4 hourly timeframe with 1.4900 acting as the final barrier for the bulls. A breakout above this resistance may open a path to 1.5050. Prices are trading above the 20SMA and the MACD is in the process of crossing to the upside. A move back below 1.4750, which is the previous higher low, invalidates this potential bullish outlook.