another sell off in chinese equities hits the aussie 1068762015
It was another wild day for Chinese equities, after stocks were mauled by bears yesterday. Last Tuesday Chinese equities coped a similar beating after the […]
It was another wild day for Chinese equities, after stocks were mauled by bears yesterday. Last Tuesday Chinese equities coped a similar beating after the PBoC dramatically and unexpectedly devaluated the yuan against the US dollar, but this week’s sell-off had no such trigger. The mauling by bears of China’s stock markets over the last two days is a reminder of just how volatile and vulnerable these heavily retail and leverage dominated markets are.
Today, the Shanghai Composite Index plummeted around 2.8% in early trade, before trimming most of these gains within an hour. But not long after the attempted come-back run bears resumed mauling China’s equity markets and the Shanghai Composite was down over 5%, after falling over 6% yesterday. The index even broke through its 200-day SMA for the first time since mid-2014 – this has been a key support zone for the pair in recent months.
AUDUSD sinks
The sheer volatility and uncertainty surrounding China and its equity markets is weighing heavily on risk adverse currencies, particularly the commodity-backed Australian and NZ dollars. AUDUSD broke through support around 0.7315 but 0.7300 held firm. This has brought back talk of a potential test of the pair’s six-year low between 0.7200/50.
AUD/JPY
A combination of AUD weakness and yen strength pushed AUDJPY to an important support zone around the neckline of a potential bearish head-and-shoulders pattern. A break here could open up a push towards 89.17 – low since February 2014. On the upside, we’re eyeing off resistance around 92.50.
Source: City Index
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