EU Session Bullet Report – The Latest On Greece & China’s Volatility

There are two market events traders should be on top of (1) Greece ongoing Deal or No Deal? and (2) China stock market volatility

Latest news is Greece has until Wednesday to pass new proposals through parliament before negotiations for a bailout can begin. Greece is hard to ignore but market participants seem to grow tired of it. EURUSD’s price action has been in consolidation and intraday range has contracted in the past two weeks.

China so far:

1. Chinese stocks have rallied very strongly past 12 months – fuelled by margin buying by retail speculators, every dip was being brought
2. Last month, the China 50 (top 50 China A shares listed in Shanghai & Shenzhen, financial services is majority sector) corrected around 26% from high to low
3. Last weekend, the government introduced supporting mechanisms including bailout fund and liquidity to brokers to stabilise the sell off
4. First impression was positive but on Wednesday the market panicked as over 50% of the stocks listed were suspended; actions by the government was also seen as desperate measures
5. On Wednesday, the China 50 fell as much as 15%, Hong Kong 40 hit low of 9%; this volatility is unprecedented in stock indices
6. On Thursday, the government introduced more measures including banning of selling, propelling the China 50 futures to shoot up 17%
7. On Friday, the momentum continued as China 50 rallied another 10% high and has stabilised lower now

In conclusion, volatility is likely to continue. What is happening in China is unprecedented in terms of responses and analysing how the market will react is one to watch

The volatility in China is weighing down on commodities currencies (AUD, NZD, CAD). Iron ore was badly beaten last week as waves of margin calls from stocks and dent in confidence led investors to reduce their iron ore exposure.

How will Greece and China affect US Fed rate hike expectation? The market has already priced in lower probability in rate hikes, with only March 2016 as certainty now (previously December 2015). US data has also not been stellar, the data dependent Fed will continue to be on the fence. Don’t forget that at the beginning of the year, the market was expecting June 2015 or earlier, then last month, it was September 2015 and now March 2016.

Trading Quote of the Day:

“7 Deadly Trading Sins”:

Wrath=Revenge Trade
Greed=Trade Big
Sloth=Hold Losses
Pride=Hide Losses
Lust=Over trade
Envy=Attack
Gluttony=Chase”

Green lines are resistance, Red lines are support

EURUSD

Pivot: 1.11

Likely scenario: Long positions above 1.11 with targets @ 1.12 & 1.126 in extension.

Alternative scenario: Below 1.11 look for further downside with 1.105 & 1.099 as targets.

Comment: A support base at 1.11 has formed and has allowed for a temporary stabilisation.

GBPUSD

Pivot: 1.5475

Likely scenario: Long positions above 1.5475 with targets @ 1.5545 & 1.558 in extension.

Alternative scenario: Below 1.5475 look for further downside with 1.541 & 1.5365 as targets.

Comment: The RSI is mixed to bullish.

AUDUSD

Pivot: 0.746

Likely scenario: Short positions below 0.746 with targets @ 0.74 & 0.737 in extension.

Alternative scenario: Above 0.746 look for further upside with 0.75 & 0.7535 as targets.

Comment: The index currently faces a challenging resistance area at 0.746.

USDJPY

Pivot: 122

Likely scenario: Long positions above 122 with targets @ 122.85 & 123.3 in extension.

Alternative scenario: Below 122 look for further downside with 121.6 & 121.2 as targets.

Comment: The RSI lacks downward momentum.

USDCAD

Pivot: 1.274

Likely scenario: Short positions below 1.274 with targets @ 1.264 & 1.261 in extension.

Alternative scenario: Above 1.274 look for further upside with 1.278 & 1.282 as targets.

Comment: As long as 1.274 is resistance, look for choppy price action with a bearish bias.

USDCHF

Pivot: 0.9425

Likely scenario: Short positions below 0.9425 with targets @ 0.933 & 0.928 in extension.

Alternative scenario: Above 0.9425 look for further upside with 0.9475 & 0.9515 as targets.

Comment: The upward potential is likely to be limited by the resistance at 0.9425.

GOLD

Pivot: 1157

Likely scenario: Long @ 1160.67 with targets @ 1167 & 1175 in extension.

Alternative scenario: Below 1157 look for further downside with 1151.7 & 1147 as targets.

Comment: A support base at 1157 has formed and has allowed for a temporary stabilisation.

 

OIL

Pivot: 53.4

Likely scenario: Short positions below 53.4 with targets @ 51.4 & 50.55 in extension.

Alternative scenario: Above 53.4 look for further upside with 53.85 & 54.7 as targets.

Comment: As long as 53.4 is resistance, likely decline to 51.4.

DAX

Pivot: 10940

Likely scenario: Long positions above 10940 with targets @ 11400 & 11500 in extension.

Alternative scenario: Below 10940 look for further downside with 10760 & 10665 as targets.

Comment: The RSI is mixed.