Where is the promised Chinese rally?

Risk On

  • New month – new funding – OPEX approaching

Risk Off

  • Dollar pull back – QE induced currencies are benefiting – Equities are affected
  • Commodities higher – bargain hunters enter the market
  • Jackson hole assessment – investors want certainty and stability for a rate hike
  • Safe haven buying in gold
  • RBA NO change in rates as expected
  • South Korea exports fall most since 2009
Global equity continue to suffer – slowdown in China is still a big factor – sell off less intense after poor data – last minute relief buying and government intervention – expect European and US equities to find stability – Dollar in the eye of the storm

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

A V shape recovery looks complete for now and dollar index is consolidating – a slight pullback here is healthy and potentially could form an inverse head and shoulder – bearing in mind that a September rate hike could propel the dollar higher. We expect the dollar index to remain volatile going to Fed meeting in 2 weeks’ time.

German Bund

Daily

4 hour

Failure on the 4 hour support of 200 ma and out of the wedge took Bunds lower – a continuation pattern emerged. Bunds continue to weaken – Euro higher – Dax has not responded well and it seems that the Bunds and Dax relationship is temporarily back on. We are watching the 4 hour RSI that has a possible double bottom while price action is diverging – thus not discounting that Bund could try higher but will find strong resistance.

Eur/Usd

Daily

4 hour

Euro daily maintain the slight hope of bullishness as it bounced off the 20 dma which is support and this coincide with the 61.8% retracement zone that offer the extra support. With the dollar index coming into resistance, there is no reason why the Euro trade could head higher in the short term. The 4 hour chart may continue to bear flag – only if we break below 1.11545 then we expect much lower number.

German Dax

Daily

4 hour

Weakness continues in DAX as the start of the week saw a weaker than expected PMI Chinese data. Current price action has broken out of the rising bearish wedge, deviated away which could potentially retest previous low or create a new lower low. Unless we see buyers return to snap this lower prices, we cannot rule out more selling.

Gold

Daily

4 hour

Weakness in global economy and uncertainty has seen funds running for safe haven assets. Price action is taking comfort as it trade above the 20 dma but any trade below that then lower prices is expected. The 4 hour chart is showing tell-tale sign of a bear flag and any break below 1120 could send gold looking for support.

Silver

Daily

4 hour

Current price action continue to trade within the inside bar and any follow through bounce in price remains weak. As long as price trade below the 20 dma, we see weaknesses and a retest lower. Daily chart has an inside day which could indicate there is a potential reversal but often we prefer to take a long trade if Silver can trade and close above the 20 dma as well. The 4 hour chart has the price action stalled at 38.2% retracement.

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