There is an unprecedented amount of uncertainty regarding the liquidity issues in China. The PBoC issued a formal statement insisting that the banking system liquidity is at reasonable levels while placing the responsibility of liquidity/credit oversight in the hands of commercial banks. The bond markets stabilized somewhat as a result of this although there were no signs of central bank interventions to ease the market’s concerns.
Meanwhile, the Shanghai Stock Exchange Composite Index closed over -5.29% in the red, breaking the 2,000 benchmark. Asian/European markets across the board plunged over 1% respectively. Commodities prices are under pressure with gold failing to break above the 1300 resistance and silver making a run for price zones below 20.00. With the exception of Shanghai Interbank offer rates, global yields continue to rise signaling a continuation in the current risk-off environment.
The FX majors have been quiet for the most part and seem to be lagging behind price movements from other risk assets. EUR/USD is straddling a key pivot level at 1.3100 with heavy momentum pointing towards the downside despite positive German business climate data.
USD/JPY
USD/JPY is looking for confirmation on the channel break above the 98 figure. We may see further pressure to the lower end of the pivot range before any continuation moves to test higher resistance levels.
AUD/USD
AUD/USD continues to find pressure to the downside on the back of the selloff in gold prices. There hasn’t been much support to lift the currency pair as the recent increase in CME margin requirements only creates more downside risk to the precious metal and selling momentum for AUD/USD