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China’s Triple Bad Loan Bank Write Off & ECB Stress Test Caution Traders – Oct 24

October 24, 2013
Couple of factors that dented overall market sentiment was after the release of report regarding China’s largest bank loan that tripled in bad loans was written off. It may have reminded market of overall position of non-performing loans of Chinese banks, which is already facing huge difficulty because of shadow banking problem. In such environment there is always risk of tighter regulatory control to minimise damage and smooth up the financial activity. China had already tighten its short term lending rate that clobbered Asian stock market.
This gave shiver to the Australian Dollar investors, which is too dependent on Chinese economy that saw investors scrambling to buy Yen. However, report of better HSBC PMI number in China should help to halt the Aussie decline and Yen gain could ease.
Later in Europe, new about ECB stress test of 130 banks and financial institutions that may require banks to provide 8 pct provision of their Capital, as a hedge to protect loan losses, which was higher than market expectation halted Euro currency and stock market up move. The move will help to get closer to European Banking Union, which is a long pending issue.
Meanwhile, today’s release of Euro-zone PMI will be crucial for next direction, a positive flash will help in resuming Euro’s upside journey to new highs. But too strong European currency may not be the ECB recipe, so as Euro moves higher, market has to watch out as European official may come up with any sound reasoning to halt/slow Euro’s rise.
while, release of BOE minutes hinted note of optimism indicating better growth condition, which also means better job opportunities in UK, which also means inflation will pick at faster pace. They all support for Pound Sterling.
However, I would not ignore release of US economic data that could still be good enough to dent the current Bearish/Dovish USD sentiment.

Twitter @asadcmka

 

GMT 3:16 – GOLD @ $ 1334 = I would still consider $ 1330-32 important support levels, only break risk for $ 1325 or $ 1317. However, I will not be surprised to up move, but needs to break $ 1340-42 for $ 1348. Prefer early buying.
GMT 3:22 – EURO @ 1.3787 = If support 1.3750 breaks, euro could dip to test 1.3710-15 zones before up again or else. 1.3680. Needs to clear 1.3825 or else another dip cannot be ruled out.
GMT 3:27 – GBP @ 1.6195 = Cable has strong support around 1.6150-60 zones only break would see fall extending towards 1.6115. However buy on dips is preferred as see possibility of GBP moving higher on break of 1.6230 for a test of 1.6255-65 zones.
GMT 3:32 – JPY @ 97.28 = Japanese currency could make small gains but should exhaust around 96.80-90 zones. Needs to push above 97.98 for 98.30 or else. 96.50.
GMT 3:34 – AUD @ 0.9653 = Aussie could resume its upward journey, but needs to clear 0.9690 for test of 0.9730-50 zones in coming days. Protection is around 0.9570-80, which should not surrender. During the day could trade in 0.9610-80 range, if fails to break the barrier.

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