CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Equities start 2016 with steep losses, how to play the currencies?

If you are playing the Chinese game then Aussie, Kiwi, and Yen are the currencies to put on the watch list.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
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2016 marked the worst first day of trading since 2008 for U.S. indices and this is only because stocks recovered some losses towards the end of yesterday’s session, otherwise it was going to be the worst trading day in almost 84 years. Definitely, the start of 2016 was not what most equity investors hoped for. China was the trigger for the selloff, as markets plunged heavily and for the first time Chinese authorities implemented a circuit breaker to stop the fall.

Lots to worry about this year, concerns around economic growth in the second biggest economy, Europe does not seem to outperform with Greece likely to be back to headlines, the Middle Eastern conflicts escalated as relations deteriorated between Saudi Arabia and Iran, markets trying to guess how many times the Fed will hike. All these factors indicate a volatility 2016 and this is what most traders ask for.   

If you are playing the Chinese game then Aussie, Kiwi, and Yen are the currencies to put on the watch list.

USDJPY dropped heavily on Monday as traders pursued the safe haven currency. The pair dropped to 118.68, touching lowest level since mid-October, before recovering towards the U.S. trading session. If Chinese market turmoil continued, disrupting the Fed’s schedule plan to hiking rates, this would create an opportunity for bears to get back in towards 120 resistance levels targeting October lows at 118.04.

Commodity currencies were the biggest losers yesterday, particularly the Aussie and Kiwi as the two countries rely heavily on China. Aussie traders should keep monitoring Chinese markets very closely as another wake of risk aversion could easily send AUDUSD back to November lows towards 0.70, but a break below yesterday low and the uptrend line from July is required for a confirmation. 

On the other hand, the Kiwi is having difficult times to recover from yesterday’s loss and is about to break below the uptrend line since Nov. However, traders should keep an eye on GDT price index, as New Zealand will be holding its first dairy auction. If prices showed some strength, this could provide a push for the Kiwi making Chinese financial markets of less impact on the currency, otherwise expect another 100 pips fall from current levels towards 50% Fibonacci retracement from 18 Nov – 29 Dec at 0.6650.

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.