Yesterday we didn’t have strong market moving fundamental releases other than the Chinese Industrial Productivity which showed a slowdown in factory activity at 6% year on year despite increasing by 6.3% in August compared to last year readings. Also of note was that retail sales rose on a year on year basis to 10.6% and increased by 10.2% last month while another marker for growth index Fixed Asset investment remained constant at its 12 year lows at 8.1%. However, economist expect a rebound of industrial productivity, a further slide of fixed asset investments and retail sales should remain constant in the next coming months while GDP will remain within the government’s levels. Despite this rosy picture, the Chinese economy should slow down even further as further reforms towards a consumption lead economy is tabled by the powerful NDRC and supported by PBOC.
The kiwi further slide down should continue this is after earlier release of the quarterly current account data which showed that New Zealanders were spending more in their travels like never before causing the import services to decrease and export services to increase triggering a service surplus decrease of $144M, their biggest since 2012. Also, with this news the international liability position was announced and it showed that liability increased this quarter to 65% of GDP at $165B up from March’s quarter of 64% of GDP at $159B.
To the charts now and despite the rising retail sales, the kiwi continued to take a beating and as it stood, there was a remarkable and strong bearish engulfing pattern formed earlier and yesterday’s bear candle broke the important support level-check the attached daily chart and see the levels where that levels has acted as support and resistance. Also note the highlighted points where price action was bouncing off from the support trend line, it happened when stochastics were turning off from the oversold positions in two different occasions.
Our tact today will to continue shorting with expectation of a strong break our below the support trend line marked in the daily chart. Our plan will be as follows:
Sell Limit: 0.728-0.733-this falls within the 23.6% and 61.8% Fibonacci levels from yesterday’s Hi-Lo.
SL: 40 pips from where a sell position is initiated
TP: 0.705-long term but a 1:3 risk reward ratio is recommended.
Otherwise may the pips be with you, have a good trading day.