Inter Market Analysis – 3rd August

Risk On

  • Continued stimulus and easing by China central banks and government ban short selling
  • Strong dollar = weaker Euro = Dax higher = Bunds higher
  • HSBC post better profit – share rose on the sale of its Brazil arm

Risk Off

  • China stock market remains jittery
  • Greece stock market reopens with a bang
  • Asian stocks started August with caution – summer doldrums?
  • Manufacturing & PMI numbers setback across Asia – Europe mixed – all eyes on US
  • Commodity market remains in a lurch – deflation was averted but will it come back?
  • Potential risk of rate hike tantrum
  • Has the global economy priced in the potential impact of Chinese equity rout?
Start of the month – potential build-up to a short term high before a summer trading sets in? Seasonality affect will be at play plus exacerbated news from Greece and FOMC members.

Multi Time Frame Analysis

USD index

Daily

4 hour

Dollar did pullback but as mentioned in our previous report, setback remains a buying opportunity. The 4 hour chart has the price action trading in a megaphone and only a break below the blue line will see lower levels being targeted. Watching how the RSI has begun diverging as well. One would have thought that this has all been priced in? 4 hour chart shows a potential triple top formation.

German Bund

Daily

4 hour

Lower time frame has signalled an RSI divergence but the daily price momentum continue to grind higher within this ascending triangle. We cannot rule out that this action could continue but are aware that the daily resistances are coming to play – confluence of resistance such as upper Bollinger band, 100 and 200 ma as well as a potential double top.

If Bunds come to resistance, expect EUR/USD to come to support and potentially a viable trade to long Euro if and when dollar hit resistance and create a swing high failure.

Eur/Usd

Daily

4 hour

Euro continues to range trade within the constricted zone and a breakout looks imminent in the near future. A make or break will set of a strong directional play – watching for sign of a clear break before taking any trades. With the dollar and bunds at resistance, the Euro may look favourable again.

German Dax

Daily

4 hour

A potential bear flag formation and a break below will target the lower daily Bollinger band for a potential support and a double bottom formation. Price currently trade above the 20 daily ma but we will not rule out a risk off scenario could be in the pipeline to take Dax lower.

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