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Chinese equities in focus after Third Plenum

Four markets in focus today.

AUD/USD

The pair is in a short term downtrend and having pushed through the 50% retracement of the August to October rally at $A0.9303, the pair could be destined for lower levels. Momentum indicators are now in negative territory so I feel the pair can now target A$0.9169 over time, although in the very short term I feel the pair could be due a modest bounce.  At 10:30 AEDT we get Westpac consumer confidence and while there is no survey, a good number here could cause short covering, which could be a good opportunity for traders to establish short positions. Price action in the China market could be interesting given the lack of any real action for the Third Plenary meeting.

GBP/USD

Poor UK CPI data (2.2% versus 2.5% expected) saw sterling sold across the board overnight and is currently oscillating around the neckline of the recent double top of 1.5894. A sustained move through here should see the 200-day moving average at 1.5495 in play, ahead of the double top target of 1.5520. At 20:30 AEDT we get UK jobless claimant count (expected to fall by 30,000) and the claimant count rate (3.9%) – poor numbers here could see the pair close convincingly below this key level.

Gold

Spot gold traded to a session-low overnight of $1261 on the back of hawkish comments from Fed members Dennis Lockhart and Richard Fisher. Gold is a little oversold and seems to be finding support below the lower band of the Bollinger band. It would not be out of the question to see a modest bounce; however with gold in a short-term downtrend from the October 28 high (having lost over 7% in the process), traders may be looking to re-establish short positions around $1277-$1280. In US trade we get comments from Fed member Sandra Pianalto and further hawkish commentary could push gold closer to $1251.

China A50 cash index

Traders have been keen to learn more from China’s Third Plenary meeting and from what I have seen so far, the communication has been fairly vague. Whether we really should be surprised about the lack of details is debatable, although it seems logical that we will get finer details over the coming week. We have heard the ruling party detail a ‘decisive’ role for the market, which is a clear upgrade from the previous language of assigning markets a ‘basic role’. Price action in China could dictate other asset classes such as copper and AUD.

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