Inter Market Analysis – 4th August

Risk On

  • Limit up on Chinese stock market as government draw a line to buy at 3600
  • Dollar weaker but could mount a recovery – commodities currencies higher
  • Oil firming up after a big fall on Monday – FTSE energy sector should revive today

Risk Off

  • Automakers warned of a slow down due to recent Chinese stock market rout
  • Athens stock exchange continue to battle to the downside with Banks red
  • Spill over from Libor rigging scandals?
  • Puerto Rico triggers historic default – no spill over though
  • Rest of Asia stock markets is under pressure – only Shanghai lit in green
  • Manufacturing PMI & Construction spending across the US and UK is disappointing
  • Commodity market remains in a lurch – deflation was averted but will it come back?
  • Potential risk of rate hike tantrum
Threat of deflation – Price cutting – Companies looking to restructure/consolidate – M&A all about reducing competition –Β  is this what we call REAL ORGANIC GROWTH??

Multi Time Frame Analysis

USD index

Daily

4 hour

Dollar bulls need to stop prices heading to and close below the 20 daily ma. With the daily RSI heavily diverging-this suggest that we could see a short term pullback on the dollar – potential support lies on the megaphone pattern as shown on the 4 hour chart. With a glut of poor economic data – questions have been raised if a September rate hike is good to go? This week employment numbers could be the catalyst.

German Bund

Daily

4 hour

Price trade above the 100 ma but 200 ma could still act as a strong resistance on the daily chart. With the 4 hour RSI diverging-we expect a short term pullback here within the uptrend channel. We are not ruling out another attempt higher for a fake high then break lower to at least test support at 50% move.

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.

Dax

Daily

4 hour

The bear flag is void after a run up higher – thus we cannot rule out a retest of resistance at 38.5% of the recent high to low. Otherwise, a spike to the upper blue channel line at 11700+ levels. Note that daily 100 ma currently stands at 11555 which could offer a decent risk reward area to short.

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