Equity markets in Asia were lower overnight, along with a drop in both Gold and the New Zealand Dollar on negative sentiment generated by weaker macro data in the region. Services sector data out of China was also lower and Chinese financial stocks were the big losers on the day after a large hedge fund sold off a large percentage of their holdings in the two of the larger commercial banks in China (Bank of China and China Construction Bank). The events overnight had a dragging effect on all Asian equity markets, with the MCSI Asia Pacific Index closing lower by 0.4 percent. In Hong Kong, the Heng Seng was lower by 1.7 percent, marking the largest decline seen in two weeks.
Bank of China lost 4 percent on the day and this was nearly matched by the 3.3 percent loss seen in China Construction Bank, during the Hong Kong session. The negative sentiment was added to by the Chinese Non-Manufacturing industries report, which came in at 56.1. The number still signals expansion in the sector (with a reading above 50) but the number shows slowing momentum as the reading from the previous month was 58. Tomorrow, trading volumes during the Asian session will decrease as Japanese markets will be closed for a holiday.
In New Zealand, the main story was seen with the country’s unemployment rate, which rose to a much higher 6.7 percent (from 6.4 percent previously). Markets were actually expecting a drop to 6.3 percent, so the negative surprise brought selling pressure to the New Zealand Dollar, which hit a low of 80.60 against the US Dollar before stabilizing. The Euro was also lower against most of the majors on market speculation that the European Central Bank (ECB) will need to implement additional stimulus measures as a means for resolving the regional debt crisis. Today will see the central bank’s monetary policy meeting, where no change in interest rates is expected.
Gold was also lower on the day, moving lower by 0.3 percent to trade below $1650 per ounce. The move came mostly as a result from the positive day for the US Dollar, as gold is priced in Dollars, rather than as a result from changes in demand expectations.
The NZD/USD continues, for the most part, to operate within the same range that we have been watching for weeks now, as prices are now coming back into support at 0.8040. This is also where the 200 day EMA is resting so the pair will likely have some difficulty grinding through on first test. Ranges cannot last forever, however, and a break in either direction is likely to be forceful and have significant follow through. Resistance is now seen at 0.8280.
The DAX saw something of a false break overnight, with prices breaking but failing to close above resistance at 6820. At this point, room to the upside is looking limited with both Fibonacci and resistance levels likely to contain prices. With this, expect short term rallies to be viewed as selling opportunities, support is now seen in the low 6500s.