Focus returns to Euro rebounds and China GDP after Swiss shock

January 20, 2015

Yesterday’s market was quite boring relatively compared to the last two trading days, but there are plenty of exciting events ahead this week. We will first look at the GDP data of the second largest economy of China tomorrow, and then the ECB meeting on Thursday.

The market has placed expectations on China’s 2014 GDP to expand by only 7.4% – the lowest since 1990. The data itself may not be so important to the market. The reasons being that Chinese government data itself may not be that credible and slightly-lower-than-expected data is somewhat acceptable by Beijing. It may not necessarily lead to further easing policies or government investments.

Nevertheless, we can watch out for other data like the GDP deflator and ‘Keqiang’ indicators. The former one will tell us the latest trend of price level and the second one – industrial outputs and electricity generation, which will give us a better picture of the true story.
We can see that the Aussie Dollar is moving within a small range before the data. If the price breaks the high or low of last Friday tomorrow, 0.8260 or 0.8160 respectively, traders can follow the trend afterwards.

AUDUSD 200115 | Vantage FX

The one important thing each trader should keep in mind is that the market is moving based on expectations, rather than the facts that everyone knows. So, if the details of QE is in line with or weaker than what most are expecting, don’t be surprised to see the Euro bounce after the release. That’s actually what’s been happening in the last two trading days. As the aftershock of Swiss Franc fades and the QE expectation has been reflected on the exchange level, the Euro has bounced from a low of 1.1460 making a reversal sign in the daily chart. I am not putting a bullish forecast for Euro, but it should be a foreboding signal for bears.

EURUSD 200115 | Vantage FX

Back to the stock markets, the Shanghai Composite slumped by 7.7% to 3116 yesterday as the shock wave of severe regulations caused massive stop loss orders of margin trading. The ASX 200 bounced by 0.19% to 5309. The Nikkei Stock Average gained 0.89%. In European markets, the UK FTSE was up 0.54%, the German DAX gained 0.73% and the French CAC Index rose 0.35%. The US market is closed for Martin Luther King Day.

On the data front, China GDP will be released at 13:00 AEDST. Eurozone ZEW Economic Sentiment will be out at 21:00 AEDST.

Have a great trading day!
Anthony


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