Investors Anticipate China Stimulus Boost
Investors are positioning themselves for a potential stimulus announcement from China, leading to increased activity in stocks, commodities, and the yuan. The announcement is expected on Friday, with estimates ranging from 2 to 10 trillion yuan.
Market Expectations
- Traders are following a familiar pattern before previous stimulus announcements, buying up Chinese stock indices, industrial commodities, and cyclical currencies.
- There is anticipation and speculation surrounding the announcement due to the potential impact of Donald Trump’s re-election and the threat of increased tariffs on Chinese goods entering the US.
- The stimulus package is expected to include measures such as local government debt relief, stabilization of the property sector, and programs to boost industrial growth and consumer spending.
Key Levels to Watch
Investors are keeping a close eye on technical levels in USD/CNH, iron ore, and copper to gauge potential market reactions to the stimulus announcement.
USD/CNH Technical Analysis
The USD/CNH pair experienced a significant surge recently, reaching the highest level since August. Despite reports of intervention from Chinese banks to counter the dollar’s strength, the price has retraced slightly ahead of the stimulus announcement.
- Key levels to watch include 7.16400 as initial downside support and 7.20400 as resistance turned support.
- Momentum indicators are currently generating bullish signals, indicating a potential bias towards buying dips and breaks in the near-term.
- Potential targets on the upside include 7.2580, 7.2973, and 7.31140.
Iron Ore Analysis
Iron ore prices have been grinding higher in anticipation of the stimulus announcement, but there are downside risks to consider.
- Watching for a potential downside break of the rising wedge pattern, with key levels at $101.30, $99.95, and $98.10.
- Momentum indicators show a modest uptrend, but the proximity to the 200DMA raises concerns for bullish investors.
Copper Market Movement
Copper prices experienced a significant drop recently, breaking through key support levels and forming an evening star pattern.
- Key levels to watch include $4.25 as a minor support level and potential targets at $4.025 and $3.921 on the downside.
- Investors may consider setting shorts with a stop above $4.25 or buying with a stop below for potential upside targets of $4.50 and $4.79.
Overall, the reaction of China-linked markets to the stimulus announcement will be crucial in determining market sentiment and future trading strategies. Traders should pay close attention to technical levels and market indicators to make informed investment decisions.