European Open: China’s PMI squeeze in a surprise expansion, GBP/AUD turns higher

Asian Indices:

Australia's ASX 200 index fell by -5 points (-0.07%) and currently trades at 7,476.70
Japan's Nikkei 225 index has fallen by -58.65 points (-0.21%) and currently trades at 27,374.75
Hong Kong's Hang Seng index has fallen by -251.46 points (-1.14%) and currently trades at 21,818.27
China's A50 Index has fallen by -142.96 points (-1.02%) and currently trades at 13,922.19

UK and Europe:

UK's FTSE 100 futures are currently down -21 points (-0.27%), the cash market is currently estimated to open at 7,763.87
Euro STOXX 50 futures are currently down -17 points (-0.41%), the cash market is currently estimated to open at 4,141.63
Germany's DAX futures are currently down -65 points (-0.43%), the cash market is currently estimated to open at 15,061.08

US Futures:

DJI futures are currently down -3 points (-0.01%)
S&P 500 futures are currently down -22.75 points (-0.19%)
Nasdaq 100 futures are currently down 0 points (0%)

China’s PMI beat expectations and expanded, which could give global growth prospects a boost as China continues to reopen
According to official data from NBS, the services PMI rose 54.4 compared with 52 forecast, and manufacturing squeezed in a slight expansion of 50.1 compared with the 48.2 forecast
AUD was the weakest major overnight after (much) weaker than expected retail sales reveals December is producing increasingly disappointing numbers
Despite this, oil prices have continued lower and reached out initial downside target mentioned in yesterday’s European report, which now brings trend support on the daily chart into focus
There’s quite a few data points for Europe including GDP and inflation for France and Germany, although none of it is considered ‘top tier’
So we could be in for a low volatility session like yesterday, given we’re fast approaching the FOMC meeting which tends to stifle volatility anyway
With that said, implied volatility is creeping higher for FX majors as traders attempt to hedge their risk on the options market
Equity sentiment remains caution ahead of the FOMC meeting tomorrow, with index futures markets pointing to a weak open and looking past stronger data from China

GBP/AUD daily chart:

GBP/AUD trades within a bearish channel on the daily chart, but appears to be within a countertrend move.

Weak retail sales has helped GBB/AUD recover back above the November low, having already printed a long bullish hammer with a couple of small inside candles (DOJI’s) to show bears were losing steam. A buy signal has been generated on the stochastic oscillator, which also produced a bullish divergence relative to the two recent price action lows. Given GBP/AUD has the ability to generate decent swings, then we like the pair for a potential long setup over the near-term.

Bulls could seek a move towards 1.7700 near the 100 and 200-day EMA’s on the daily chart, or seek bullish continuation patterns on the 1 or 4-hours charts to increase the potential reward to risk ratio.

Economic events up next (Times in GMT)

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