EUR, GBP Near Support, China PMI Next

Sentiment continued to deteriorate Tuesday and the euro and pound were the chief victims as global growth concerns mount. The yen was the best performer while sterling lagged. Up next it's the Caixin China PMI. A new video has been issued for Premium subscribers about the existing and upcoming trades as well as a new note & charts on EURUSD. GBPJPY and DAX trades deepen in the profut, EURUSD and EURCAD are in the red, while USDJPY is flat.

Click To Enlarge

It's a tough market for headline-driven traders at the moment as sentiment and momentum are the prime drivers. The lone bit of economic news in US trading was the Richmond Fed as it slipped to -5 compared to +2 expected. The Philly and Empire surveys also missed expectations in a sign that US dollar strength is crimping manufacturing.

The dollar was strong once again on Tuesday, in particular against the euro and pound. EUR/USD and GBP/USD both fell for the third consecutive day. Both now rest just above last week's lows in what will be an important technical challenge.

We are keeping a very close eye on the bond market. US 10-year yields hit a two-week low of 2.11% Tuesday and German 10s fell to a three-week low. The synchronous falls in global yields highlight global growth concerns.

Looking ahead, focus on China as one of the rare private economic indicators is released. The Caixin PMI (former HSBC PMI) is due at 0145 GMT and expected to improve slightly to 47.5 from 47.3. After spending most of the past year near 49-50, the previous two readings deteriorated sharply.

A fresh low, even a modest one, may set off another round of China-driven worries. Along with the reading, watch the reaction in Shanghai stocks and the Australian dollar. The Aussie had posted a two-week bounce but it's faded badly in the past three days.

Other news to watch includes the Fed's Lockhart at 2230 GMT and Australian skilled vacancies at 0100 GMT.