Time Out – Inter Market Analysis

Risk On

  • Draghi deliver a big blow to the Euro – European equities rose but gave it all back into the close
  • Market wants to see more QE from Draghi et al – today NFP data will play a big role
  • Did Draghi hint that the Fed has flexibility not to raise rates?
  • Potential short covering ahead of US Labor day – additional new funding?

Risk Off

  • Dollar Yen trade has been the barometer of risk on and off
  • German Factory orders much lower than expected – summer slowdown?
  •  Hong Kong PMI came in weaker than expected
  • IMF says no BOJ easing needed if inflation expectation remains anchored
  • Draghi outline a revised weaker than expected economic forecast
  • VIX moved a tad higher into the close as equities sell off during Asian trading hours
With hindsight we did get the Draghi effect but the bull trap seems valid as the spike higher was sold into the close. We have NFP expected to come in lower – bad data = higher equities? Lately biases has change to bad data = lower equities

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

Dollar bull is still very much kicking and alive – reinvigorated by Draghi effect that kick the Euro lower – traders were rushing in to the dollar. If the daily ascending triangle formation is still valid, we are now at the top of the resistance zone and here is the potential make or break area. Failure of any rate hike then expects a swift fall in the dollar to test the lower trend line.

German Bund

Daily

4 hour

Bunds was heavily bid post ECB conference – investors seek safety – while Euro sell off and dax rallies but then reverse all the gains. 4 hour chart shows a potential Inverse Head and Shoulder pattern with the head forming – so in the short term we expect a pullback that is worthy of buying. A break and close above the daily 20 dma could add the confidence for Bunds to move higher – short term the 20 dma will be resistance.

Eur/Usd

Daily

4 hour

As per yesterday’s write up, we have the move lower post Draghi comment that the ECB will increase QE share limit and they are considering additional QE if the situation deteriorate – a very dovish remark. Euro found support on the 4 hour 200 ma which also coincide with other support zones on the daily which comes in at 50 and 100 dma. Could we see a lower euro going forward? in the short yes – and the potential target is the lower purple trend line.

German Dax

Daily

4 hour

We did have a brief moment of respite and a rally on the back of ECB#s Mario Draghi comments – the sell off into the close shows that traders are not confident to hold on as we hit Friday NFP data report that could make or break the question of a September rate hike.

Gold

Daily

4 hour

We have a close below the 20 dma and the short term picture on gold price does not bode well for bulls. The 4 hour chart shows a potential bear flag formation and it looks like a retest to the 200 ma is still possible. Either we get a triple bottom at 1118 for support or we expect lower prices to retest 1108 area.

Silver

Daily

4 hour

The biased is for a retest lower after the rejection of the 20 dma but we have NFP data today so anything can happen and often Silver price action is very volatile. We will not be surprise to see an erratic move to take out any shorts and longs. The 4 hour price action also has a megaphone formation that does not give a clear vision to the next direction it could move.

 

 

 

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