By Fast Brokers – The Aussie is underperforming today in reaction to a collapse in the Shanghai Composite, which dropped by over -5% for the first time since August 2009. The SCI is now down by nearly 20% over the past month alone as investor uncertainty increases concerning a slowdown in China. Wen issued another statement today implying the government will continue to constrain the real estate market until prices are under control. In addition to downward pressure stemming from future policy fears, investors are concerned that the swift pullback in the Euro will have a noticeable impact on demand for Chinese exports considering the EU is the nation’s top trading partner. Meanwhile, the Aussie is being damaged from this negative sentiment as a slowdown in China turns from concept to reality. A cool down in China could weigh on demand for Australian resources, denting economic growth in Australia and consequently pressuring the RBA to keep the rate hikes on hold. Such developments and connections are clearly proving negative for the Aussie has .90 fades into the background. Speaking of the RBA, investors will digest the RBA’s meeting minutes tomorrow, meaning the Aussie could undergo a period of elevated activity during the Asia trading session. The EU, UK, and U.S. will also release key data points, meaning activity could pick up across the risk trade.
Technically speaking, the Aussie faces technical barriers in the form of 5/13 and 5/10 highs. As for the downside, the Aussie has technical cushions in the form of intraday and 5/7 lows along with the psychological .87 area.
Price: .8803
Resistances: .8803, .8822, .8843, .8855, .8869, .8885, .8898
Supports: .8782, .8765, .8744, .8734, .8721, .8709
Psychological: .89, .88, .87, May lows
(click chart to enlarge)
Market Commentary provided by Fast Brokers.
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