The markets in China were in free fall today on fears on the impact of the spread of coronavirus, and more importantly, imposition of strict covid zero policy and lockdowns. Beijing is the believed to be evolving into the next Shanghai, after the government ordered residents not to leave the Chaoyang district.
The Shanghai SSE dropped -5.13% to 2928.51, the first close below 3000 handle since 2020. In any case, near term outlook will remain bearish as long as 3140.89 resistance holds. Deeper decline lies ahead.
More importantly, based on current momentum, long term fibonacci support at 61.8% retracement of 2440.90 to 3731.68 at 2933.97 is unlikely to be defended. That is, the whole down trend from 3731.68 could extend in to 2440.90/2646.80 support zone before bottoming
The decline in Chinese Yuan also looks unstoppable, even after the worst week since 2015 last week. USD/CNH (offshore Yuan) surged through 6.6 handle today, breaking through another important medium term resistance at 6.5872 (2021 high).
The next hurdle is long term fibonacci resistance at 38.2% retracement of 7.1961 (2020 high) to 6.3057 (2022 low) at 6.6458. Strong resistance is expected there to cap upside on first attempt. But overall, break of 6.5214 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat. That is, there would be more downside in Yuan then not.
