Nothing going on so let’s have a think about what might happen if we see a serious unwinding in Chinese financial markets.
The most strikingly obvious trade would be that the AUD/USD would fall heavily but what would happen to the other majors? The USD would probably rally across the board in the initial phase at least. Based on what happened during other recent risk-aversion events that were not directly linked to the EU Zone, the EUR would also probably make some strong gains especially on the crosses. As the market is generally bearish and short both the EUR and USD, a significant risk aversion event emanating out of China say would probably increase the positive impact on the two big majors.
I’m just guessing here, but perhaps the EUR is holding up reasonably well on the crosses at the moment because the risk-aversion in China is starting to have some significant impact. (Perhaps Nicola’s long EUR/AUD trade could have some market grounding to go along with the technical signals).