Australia stocks slide as growth risks mount 03/10/19

Global stocks declined as traders reacted
to weak manufacturing numbers from the United States. Yesterday, the Dow
dropped by more than 500 points while the Nasdaq index fell by 125 points. The
declines were also in reaction to a new trade war that started yesterday
between the United States and Europe. After a WTO victory, the Trump
administration said that it would place tariffs on European goods worth more
than $7 billion. The EU is expected to retaliate with its own tariffs as well.
These tariffs come at a time when the world is going through a manufacturing
recession.

AUS200. Australian
stocks declined by more than 2%. This was in reaction to the ongoing
challenging issues on trade. Earlier today, the Australian Bureau of Statistics
released trade data. Numbers showed that the seasonally adjusted trade surplus
fell from A$7.25 billion in July to A$5.92 billion in August. In August,
seasonally adjusted exports also declined to A$40.9 billion while imports
increased to more than A$35 billion. The numbers came a few days after the RBA
slashed interest rates by 25 basis points and lowered the inflation target.

The AUS200 index peaked at $6787. Since yesterday, the index has declined from a high of $6761.10 to today’s low of 6475.70. On the four-hour chart, the index is trading below the 14-day and 28-day moving averages. The RSI has declined to the oversold level of 30 while the signal and main lines of the Stochastic indicator are at the oversold level. The index could continue moving lower, to test the important support of $6400.

GBP/USD. Cable was relatively unchanged in the Asian session as traders continued to watch the political circus in the UK. Yesterday, Boris Johnson revealed his Brexit plan. He stated that his plan involved Northern Ireland leaving the EU Customs Union at the end of the transition period along with the UK. In his proposed deal, North Ireland will also stay aligned with EU standards on goods at the end of the 2020 transition period. Johnson also said that both the EU and the UK will commit to a treaty to never conduct customs at the border. The deal was trashed by the EU, which argued that it would be trapped without the backstop. Labour’s Jeremy Corbyn said that he didn’t think the deal will receive any support. Meanwhile, UK stocks had the worst day since 2016.

The GBP/USD pair rose slightly after the
speech but remained unchanged in the Asian session. As of this writing, the
pair is trading at 1.2300, which is along the 23.6% Fibonacci Retracement level
on the hourly chart. This price is between the Envelopes indicator. Key levels
to watch today will be the previous low of 1.2200 or the 38.2% Fibonacci
Retracement level of 1.2350.

XBR/USD. The
XBR/USD pair declined after the US released the inventories numbers. Data
showed that inventories rose by more than 3.1 million barrels. This was higher
than the consensus estimates of 1.567 million barrels. The decline was also
attributed to the slowing manufacturing sector, which tends to lead to a weaker
demand. Today, the market will receive more data that will gauge the health of
the economy. The ISM will release the non-manufacturing PMI data, which is expected
to show a contraction from 56.4 to 55.0. The factory orders for August are
expected to slide by -0.2% from the previous gain of 1.4%.

As of this writing, the XBR/USD pair is
trading at 52.87, which is slightly lower than the low of 52.22. On the
four-hour chart, this was the lowest level since September 2. The price is
below the 14-day, 28-day, and 50-day moving averages. The RSI remains slightly
along the oversold level of 30. With the pair forming a triple bottom on the
four-hour chart, it might start moving higher today.