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CNH, AUD & NZD Consolidate Overnight Weakness Amid Sour Risk Backdrop

FOREX
  • Sentiment across global currency markets remains sour to start the week as Chinese stock markets registered one of their worst sessions since the financial crisis of 2008. Amid the declines, the yuan weakness extended and USDCNH is now seen comfortably north of the 7.30 mark.
  • Technical trend readings are unsurprisingly in a bull mode position. Moving average studies, a positive price sequence of higher highs and higher lows and rising momentum, all point to a continuation higher in the pair. Initial resistance is seen at 7.3693, a Fibonacci projection of the Sep 12 - 28 - Oct 5 price swing.
  • Markets will remain on watch for any further intervention following state banks supposedly selling dollars to contain the CNY weakness last week. Initial support is at 7.1611, the 20-day EMA.
  • Amid the more pessimistic risk backdrop, AUD and NZD both sold off over 1% during APAC trade and have consolidated their declines throughout Monday.
  • EURUSD (+0.10%) has largely shrugged off a dire set of PMI manufacturing and services numbers from across Germany and France, with conviction light ahead of the ECB rate decision on Thursday.
  • In similar vein, GBP remains close to unchanged as the election of Rishi Sunak as the new PM provides a slightly more optimistic view for UK investors.
  • Japanese authorities have yet to confirm that they were behind the steep JPY rallies seen on Friday and overnight on Monday. Despite the rapid sell-off to fresh lows at 145.56, JPY is also among the poorest performers on Monday following a firm USDJPY bounce to around the 149 level.
  • A fairly light data calendar on Tuesday with German IFO and US consumer confidence expected. The ECB meeting remains the key event risk this week with central bank meetings in both Canada and Japan also in focus.
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