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China Volatility No Game Changer; Greek Liquidity Improves

China Volatility No Game Changer; Greek Liquidity Improves

Your DAY’S Trading Inspiration: We begin what is expected to be a range-bound week across the majors with news that Australia’s Jason Day has clinched his first major, taking out the PGA Championship this morning. If you are ever looking for an inspirational story on persistence, practice and hard work to hit your trading goals then this man’s story is the one. Definitely worth doing some more reading.

Moving to markets and what we expect from the week ahead, the implication of the Chinese central bank’s moves are still being scrutinised by markets, while the media isn’t yet done running the headline either. The reality for the week is that the volatility caused by the PBOC unexpectedly playing with the yuan fix rate is behind us with no real effect on policy outside of China, most notably the US. The US actually seems to have welcomed the move, with suggestions that while the market may have been surprised, maybe the Fed had been given a bit of a tap on the shoulder beforehand.

Ma Jun, the chief economist at China’s central bank continued to cool things down over the weekend:

“The nation has no intention nor needs to be involved in currency war and the driver of future economic recovery will come from domestic consumption.”

“A more market-oriented pricing mechanism for the yuan will help to avoid excessive deviation from the equilibrium level and significantly reduce the possibility of sudden fluctuations.”

Sure… ‘Market oriented’.

Really all that matters is the way that the US perceives the weakening of the yuan, and time and time again, they have indicated that it is in no way a game changer. The price of a September rate hike scenario is firming by the day.

Back in the DAY: The weekend saw Greece accept the conditions that were laid out for them to secure that third bailout deal they desperately need.

A €26+ billion package will hit the Greek system this week pending the formality of the deal going through the various European parliaments. Germany has been one of the most outspoken against the package, but have reluctantly backed down to conclude the formalities.

Although it wouldn’t be hard, Greece is actually doing a lot better with even the ECB being able to lift its ELA ceiling. Liquidity inside the Greek banking system has improved and deposits/withdrawals are returning to normal. Christine Lagarde and the IMF are still not happy, but the wheels are well and truly rolling again:

“I remain firmly of the view that Greece’s debt has become unsustainable.”

On the Calendar Monday:JPY Prelim GDP (-0.4% v -0.5% expected)

USD Empire State Manufacturing Index

Chart of the Day: The AUD/JPY weekly chart continue to tease traders, breaking major trend line support, but then continuing to consolidate on the re-test.

AUD/JPY Daily:

AUD/JPY Daily Chart

AUD/JPY 4 Hourly:

AUD/JPY 4 Hourly Chart

Keep an eye on the Technical Analysis section of the Vantage FX News Centre today as we look at the above AUD/JPY charts in more detail.

Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd, does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. The research contained in this report should not be construed as a solicitation to trade. All opinions, news, research, analyses, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently any person acting on it does so entirely at their own risk. The experts writers express their personal opinions and will not assume any responsibility whatsoever for the actions of the reader. We always aim for maximum accuracy and timeliness and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on the service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.

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