Inter Market Analysis – 30th July

Equity

Risk On

  • Baidu announced a 12 months buyback programme worth 1 billion
  • Asian shares tipped higher on the back of dovish Fed statement
  • Cost cutting seasons with Shell and Centrica on the headline
  • Nokia in surprise profit

Risk Off

  • Australia building approvals m/m came worse than expected -8.2

Outlook: Post FOMC dovish statement, US GDP forecasted to come in better than expected

Biased: End of the month book squaring – positioning for a possible rate hike tantrum into August?   

Currencies

  • Turnaround dollar despite dovish statement – found support and held – Dollar remains king
  • Commodities currencies continue to suffer the headwinds
  • Yen weakness continues – helped Japanese exports favourable – Nikkei agrees

Outlook: Opportunity for a rate hike by Miss Yellen put into question but most likely a September hike

Biased: Expect US GDP to create market volatility as we approached end of the week  

Bonds

  • Given Euro weakness, Bunds continue to enjoy higher prices. However, we are threading into potential resistance on the Bunds and a long Euro trade is viable soon

Outlook: Break above 154.22 will be impressive but watch out for daily ma resistance at 100 and 200. In addition, we have 50% fib retracement confluence in that area.

Biased: Bunds look exhausted after an impressive run higher that we envisaged but there are rooms higher still

Commodities

  • We have had a retest of lower low on several commodities
  • Various commodities reached oversold territory but without any sign of reversal – rallies are selling opportunities

Outlook: Watch the dollar index closely for clues while commodities continue to struggle

Biased: Rallies continue to be selling opportunities

Watch list

USD index

Dollar found support at 20 ma after the kneejerk reaction at 12063 – watch that the RSI is diverging after dollar hit resistance and has made lower low and lower high. Is this a potential sign of a topping pattern?

German Bund

The lower timeframes on the Bund suggest short term weakness ahead of resistance. Can it break above previous high of 154.22? Possible yes and break higher to 50% fib and 200 ma coming in as confluence where we look to setup a short.

Copper

Lack of global demand and potential tightening in the US does not help Copper prices. Power house such as China continue to struggle. Only a break above the orange downtrend line will give buyers some confidence. Otherwise, sellers continue to dominate the copper market.

German Dax

Dax filled up previous gaps as envisaged in our write up – post Greece Euphoria – Chinese stimulus – concern about rate hike have all been priced in. Current chart setup shows a bearish wedge and a retest of 200 ma is in the cards. We will not rule out a retest on the lower BB line. Resistance stands at 20 ma and the 50% fib from last week high to this week low.

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