Ahead of China PMI after Opening Gaps in JPY, GBP

The UK downgrade and talk that Kuroda will be the BOJ nominee caused sharp opening falls in the yen and pound. The Chinese PMI from HSBC is the main item on the calendar to start the week. Both of Thursday's Premium cable shorts hit all targets on Friday at 1.5190 & 1.5150 from entries at 1.5350-1.5300. Both USDCAD trades which hit all targets were replaced by 2 new longs on Friday. The short in EURUSD awaits final target at 1.3140. See latest Premium Insights for the charts & latest trades.

The reverberation from the Moody's downgrade continued as cable gapped to as low as 1.5089 at the open. It's the lowest in two-and-a-half years and confirms the break below the triple bottom near 1.5250.

It's surprising to see the overwhelming weakness in the pound from a downgrade that was largely expected. Thin trading and an stop losses make us wonder if there are signs of a short-term capitulation.

The trade that looks like it has been re-energized is to be short the yen. USD/JPY jumped to the highest since mid-2010 at the open. The pair has been consolidating for the past three weeks and that may provide the base to break through resistance at 95.00.

With the big moves to start the week, it's likely to be a volatile day.

At 0145 GMT, the volatility may increase when HSBC releases its flash reading on Chinese manufacturing sentiment. The index is expected to edge lower to 52.2 from 52.3 but the recent declines in industrial metals show some skepticism about the global economy. The Golden Week holiday could also play havoc with the survey and lead to a large miss.

Given the recent declines in AUD and CAD, a soft reading could be especially damaging.