Inter Market Analysis – 12th August

Risk On

  • China affectively laying out the foundation for its own survival which will filter to the global economy in the final quarter of 2015
  • As per our commentary made on 31st July that global economy has not priced in the effect of China stock rout – here we are flipping to say that the extra Stimulus will start to kick in for a great end of year fireworks
  • Global equities sell off pricing in the 2nd Yuan devaluation but watch out as the effect should lessen by now – thus potential risk on scenario that market has to price in
  • Expect talk of Fed delaying the rate hike – weaker dollar ahead

Risk Off

  • China exporting deflation, price war, currency war and what do you know – stock rout included too
  • Asian shares fell by end of trading Tuesday after Chinese devalue further – potential rebound
  • UK unemployment rises as wage growth suffers
  • Greek bailout cast doubt about German support
  • Political instability in Turkey continues
  • Oil prices potential double bottom – commodity continue to suffer as China devalue
Further devaluation and now its FEAR of more intervention and devaluation

Currency war escalate  – global competitiveness and deflation are the risks here – price war and the risk that Fed do not need to rate hike in September

Expect a paradox between US and UK economy that looks to taper while Europe and emerging economies continue to print

Flipping to say that the extra Stimulus will start to kick in for a great end of year fireworks in global equities

Multi Time Frame Analysis

USD index

Daily

4 hour

4 hour chart has support on the 200 ma as well as 76.4% fib. Bulls have to show its resilience to push it higher but given the last 2 days of Yuan devaluation, we could well see a repeat in the selling albeit less severe and now the price action is at a key support level. A break below spell trouble but we envisage a rebound here. Daily dollar index RSI continue to head lower and it should pan out in the next few days. Bear in mind that the 4 hour megaphone pattern are still at play so we will not rule out a potential fall to the lower end IF Fed delay a September rate hike…

German Bund

Daily

4 hour

The daily 200 ma has acted as resistance here while the RSI could potentially break out – but we are cautious of further gains in bunds as the RSI is diverging on higher Bunds. Euro strengthen and Bunds strengthen does look a tad odd but we will keep a close eye on the 4 hour as well as the top looks heavy now with a potential gravestone doji formation evolving today?

Bunds rose on the back of higher Euro as well – with short term outlook for higher Bund still in store.

Eur/Usd

Daily

4 hour

Chinese propelled trade as the Yuan devaluation shifted the long dollar camp to Euro. Technically, a break out of the down trend has also give the catalyst for shorts to cover. Current price action is already trading above the 50% fib and as the 2 arrows pointed out on our 4 hour chart lies the next resistance at 61.8 and 76.4%. The market will continue to adjust the change in forex landscape after what the PBOC did – we could well have a stronger Euro until the market stabilise that September rate hike is still possible – waiting for a top to short.

German Dax

Daily

4 hour

Broke below key rising trend line was the first alert we have – followed by further Yuan devaluation – the market is set to repeat itself today but with lessen effect as most are priced in by now. We have covered extensively with update on our twitter feed – Dax daily come with Fib confluence support, 200 dma and rising trend line – we are also watching the RSI could potentially start a turnaround.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s