Additional China stimulus helps stimulate the Aussie

After trouble in the housing market and a recent bout of poor data from China, including weak Retail Sales and Industrial Production, China has implemented several stimuli polices to help the beleaguered sectors. Earlier in the week, China announced plans for $29 billion in special loans to help troubled developers in the housing market. In addition, it cut loan prime rates, including a 15bps cut in the 5-year. This was viewed as helping the housing market, as this is the rate mortgage rates are based off. Earlier today, China announced 19 additional policies to help the economy, worth $146 billion. These policies will primarily support infrastructure projects. However, although these may be positive steps towards helping housing and infrastructure, will it be enough to help the broader economy?

One currency that has seemed to get a bid on the back of the China news is the Aussie. EUR/AUD had made a Year-to-Date high on February 4^thnear 1.6226 and quickly began a decent lower. Two months later, on April 5^th, the pair made a low of 1.4320 as the Euro sold off due to a lack of commitment by the ECB to raise interest rates. EUR/AUD then bounced just above the 50% retracement level from the February 4^th highs to the April 5^th lows, near 1.5273, in an ascending wedge formation. The pair spiked through horizontal resistance at 1.5354 and resumed the prior trend lower, breaking below the ascending wedge on July 7^th near 1.4975. The target for the breakdown of an ascending wedge is a 100% retracement. Today, after the China stimulus announcements, EUR/AUD reached the 1.4320 level and is currently trading below it!

Source: Tradingview, Stone X

Trade EUR/AUD now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, EUR/AUD can trade much lower than current levels. The next level of support isn’t until the 161.8% Fibonacci extension level from the lows of August 14^th to the highs of August 18^th, at 1.4193. Below there, horizontal support dating to lows of March 2017 cross at 1.3873, then the 2017 lows down at 1.3627. However, if the break proves to be a false break below the prior support, resistance is just above at the at 1.4320. Above there, horizontal resistance crosses at 1.4359 and then the highs from August 24^th at 1.4465.

Source: Tradingview, Stone X

China has begun new economic stimulus measures. But is it too little too late? The Aussie doesn’t seem to think so. EUR/AUD has been selling off for a while but has become more aggressive once the stimulus measures were announced. The pair sits just below a key support break. Will it continue lower or will this prove to be a false breakdown?

Learn more about forex trading opportunities.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.