China rate hike rumours and bank concerns puts risk aversion back on the table

<p>China rate hike rumours and bank concerns puts risk aversion back on the table. The US dollar has attracted buyers for the first time in […]</p>

China rate hike rumours and bank concerns puts risk aversion back on the table. The US dollar has attracted buyers for the first time in some time this morning as traders eased their appetite for risk and looked to take some risk off the table on rumours of a potential Chinese rate hike and negative comments on Chinese banks.

Range: 1.6020 – 1.6082
Support: 1.6000
Resistance 1.6150


Sterling just doesn’t seem to be able to buy a friend at the moment and it looks to be crowned again the winner of the ugly currency  contest as it continues to fail  to  sustain gains against its main rivals for the top spot ( euro and US dollar). The UK will see some key data today with the release of the service PMI number, which is the important PMI number as the UK is a service driven economy. The consensus is for a reading of 53.5. Don’t forget that the Bank of England rate announcement is due on Thursday, although no change is expected. Traders continue to watch for any break below 1.59 as a potential bearish indicator.
Range: 1.4460 – 1.4554
Support: 1.4420
Resistance 1.4580


The Euro failed to revisit the highs of 1.4580 seen in Asia yesterday and consequently suffered as the positive risk tone seen over the weekend on a positive Greece outcome was reversed with negative news on China. There is wide speculation in the Chinese press that a rate hike is imminent this weekend. Add to this comments from Moody’s that the outlook for China’s banking system is potentially turning negative and that scale of the loans problems are greater than the Chinese Government had anticipated. The ratings agency sighted $540 billion of local government debt that Chinese auditors did not discuss in a recent report. As such, it may not be surprising that the market runs for the risk off trade.
Range: 1.0666 – 1.0745
Support: 1.0600
Resistance 1.0800


The Australia dollar didn’t react to the stronger trade surplus of 2.333 billion versus a forecast as 1.9 billion as it was deemed the component of exports to ore was considerably lower. With the RBA keeping rates on hold at 4.75% and a dovish statement sighting that monetary policy remains appropriate as growth forecasts are downgraded and aired concerns over the risks to the global economy, it isn’t surprising that the Australian dollar failed to sustain recent gains in the risk off environment.

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