China Trade Data Next, SNB Eyed

GBP/USD finally ended its worst losing streak since the financial crisis as it rebounded in holiday-thinned trading. CFTC positioning data showed a fresh plunge in yen shorts. In Asia-Pacific trading, Chinese trade data will be in focus but a sprinkling of data from New Zealand and Japan will also weigh. A special VIDEO CHARTS edition is available for Premium subscribers, containing Ashraf's technical take on 4 major indices and FX pairs.  

Click To Enlarge

News and data from the UK was quiet to start the week but that didn't stop a +100 pip rally in cable. After falling to a four-month low on Friday in the midst of nine consecutive losses, the pound finally conjured a relief rally.

At this point, it's little more than a dead-cat bounce but the upside is intriguing. The scale of the fall over the past two weeks was more than any change in fundamentals may have suggested. The July low of 1.5330 is an early upside level to watch.

Other moves that stood out with North American traders on holiday were declines in oil and the Swiss franc.

A nearly $2 decline in oil was triggered by worries about China after a 2.5% fall in the Shanghai Composite on Monday. The Swiss franc decline was more of a mystery as it trended a half-cent higher in steady buying throughout European trading.

The easy answer would be SNB buying but there were many similar-type moves throughout August and data released Monday didn't show signs of large-scale intervention. FX reserves climbed 1.7% but that was probably entirely due to a 2% rise in EUR/CHF in the month. Since the SNB is said to be a "quasi hedge fund", then would it be aware of the unfolding damage among EM-oriented  mony managers and upcoming unwind of euro shorts? Would such knowledge induce the SNB into outright EUR longs? 

Looking ahead, the New Zealand Q2 manufacturing survey is due at 2245 GMT. The RBNZ is entirely expected to cut rates a quarter-point on Thursday but further cuts aren't totally priced in. A soft reading here could change that or be the final factor that sends Wheeler to the sidelines.

The main event to watch is the release of Chinese trade data. There is no specific time for the release but it's usually out around 2:30 GMT. The consensus is for a $48B surplus but imports and exports are the key. They're expected to contract 6.6% and 7.9% respectively. A deeper fall could trigger renewed concerns about an economic slowdown while an improvement may calm nerves.

Japan is another focus with July current account data and the final Q2 GDP report due at 2350 GMT.