MARKET BRIEFING – LONDON OPEN 31.07.2015
The unprecedented market decline continues in China. The government interference of 27 July only had a brief success with the Shanghai Composite Index now declining to pre-intervention levels. At the moment China Securities Finance Corporation, which belongs to the state, is spending around 180 billion yuan a day to support the equities.
However, as the investors started to figure out the timing of the government purchases, waiting that moment to unload their stocks. This is rendered this measure ineffective.
The relatively quiet mornings in the Shanghai Stock exchange are usually followed by very volatile markets in the afternoon, which made analysts question the reasons of such a perplexing behaviour. Currently, a few factors were identified.
The margin call from lenders is and market hitting stop losses often prompt the wave of new selling. In addition, the investors are usually opening position later in the day, after having the opportunity to observe the market behaviour in the morning and figuring out that the government purchasing is going on around that time.
One more factor adds to the share market decline. The Shanghai Stock exchange is dominated by the individual investors, who mostly use technical analysis rather than fundamental factors when making their investment.
The companies’ value, in this case, is diverted from the chart’s actions, rather than based on the calculations of the fair value of the company.
This in turn could lead to illogical and “go with the flow” actions, leading to further sell-off. This also complicates the classical valuation techniques making the market more unpredictable and difficult to control.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.1030
Target 2: 1.0832
Projected range in ATR’s: 0.0099
Daily control level: 1.1125
GBPUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.5710
Target 2: 1.5490
Projected range in ATR’s: 0.0110
Daily control level: 1.5585
USDJPY
The intraday technical outlook
Trend 1 hour: Range
Target 1: 124.72
Target 2: 123.54
Projected range in ATR’s: 0.595
Daily control level: 123.30
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.9769
Target 2: 0.9613
Projected range in ATR’s: 0.0083
Daily control level: 0.9600
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3045
Target 2: 1.2841
Projected range in ATR’s: 0.0102
Daily control level: 1.2860
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7375
Target 2: 0.7213
Projected range in ATR’s: 0.0081
Daily control level: 0.7350
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1104.24
Target 2: 1072.32
Projected range in ATR’s: 15.96
Daily control level: 1105.00
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 55.24
Target 2: 52.40
Projected range in ATR’s: 1.418
Daily control level: 47.40
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