Watch the Pacific not the Suez

Two of the least-affected areas in the world during the pandemic have been China and Australia and yet those two spots are currently sending troubling signals.
China walked back tightening talk recently but it hasn't done any good for the domestic stock market. The Hang Seng fell hard for a second day on Wednesday and is now down 11% from the February high. That's despite a weakening of the yuan over that period.
The Australian dollar also continues to struggle and is threatening the February low, falling more than 400 pips since the final trading day of February.
What's especially troubling is that both AUD/USD and the Hang Seng have traced out text book head-and-shoulders patterns with the Hang Seng neckline already broken and the Aussie barely hanging on. Recent Chinese data on trade, industrial production and retail sales has all been strong so these are tough moves to square.
The pandemic is clearly part of the problem. Variants are leading to another wave outside of the UK, US and a few other countries where vaccines have gotten ahead of the virus. Could it be as simple as virus fears? That's tough to believe given that markets have been so effective at looking through the pandemic for the past few months.
There is little else to fret about but the technical signals are unmistakable and need to be watched closely.
Another spot to keep a close eye on is bonds. A US 5-year sale was a touch soft on Wednesday and it will be 7s on Thursday. A month ago, a terrible reception at the 7-year sale set off all kinds of alarm bells in markets and we haven't recovered since. The results are due out just after 1700 GMT.Latest IMTs
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