The Shanghai Composite fell 2.4% overnight, snuffing out two weeks of mild recovery in Chinese shares. The decline came after the government pledged to cut off credit facilities to industries threatened by over capacity. The regulatory note asked banks not to give “any form of new financing” for projects in these industries that were not properly approved.
AUD/USD slumped as low as 0.9042, scarcely above last Wednesday’s cycle low of 0.9036, but a barrier at 0.9000 and large bids at 0.9025 are attracting bottom pickers. Given the fall in Chinese shares it’s impressive to see AUD higher. When something doesn’t sell off on bad news, it’s often primed to go higher.
The risk is that Chinese sentiment falls even further. Technically the Shanghai Composite is a mess but if it can stabilize, there might be an Australian dollar relief rally. Another risk this week is Wednesday’s Australian jobs report.
Spot continues to tick higher to 0.9108 with offers set at 0.9120 and larger offers at 0.9145/50 with buy stops above.
AUDUSD 10 minute
