Macro Afternoon

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Outside Australia it’s been a much better return to form for equities here in Asia, particularly in China which has extended its bounce from Friday in both Hong Kong and the mainland, mainly on the back of a proposed new tax plan for households to stimulate the economy. FX markets have been generally positive for USD, with the Aussie dropping to a new weekly low on the gap open before recovering slightly.

The Shanghai Composite surged at the open and then some, gaining more than 4% to currently be at 2661 points, now well above key support at the 2600 level, filling in the last two weeks of losses. The Hang Seng Index is up by 2.5% to 26211 points, also getting back above previous support level at 26000 points in what is an impressive bullish engulfing candle on the daily chart:

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S&P and Eurostoxx futures are up slightly with the four hourly S&P 500 chart bouncing off support at the 2760 point level but this is nowhere out of the woods yet:

Japanese stocks came back in a more modest fashion with a slightly weaker Yen helping, the Nikkei 225 closing 0.5% higher at 22642 points. The USDJPY pair is almost back to last week’s intrasession high, but is still unable to get back above stiff resistance at the 112.80 level:

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The ASX200 is still under pressure as fallout from the housing market reaches equities via lower car sales, the local bourse falling 0.6% to 5904 points, with psychological resistance at 6000 points a distant memory. The Aussie dollar slumped on the open, absorbing the weekend news (stupid lack of weekend trading!) to then bounce back after briefly dropping into the high 70’s versus USD. The pattern on the four hourly chart looks like a rounding top here with a downside target at 70.50 this week:

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The economic calendar starts the week slowly with some short term Treasury auctions but not much else, with most eyes on continuing Brexit and Italian budget negotiations.