Counting Down To FOMC

Risk On

  • Positive turnaround on Chinese stock market as Government intervene late in the day
  • Japan Final GDP came in slightly better – key to Abenomics policy
  • Chinese Trade balance higher – suggesting a healthy export industry
  • German Trade balance also higher – a growing economy
  • Stronger dollar index maintain the course for risk on trade – weaker Yen breaking above 120
  • VIX tamed and trading much lower numbers

Risk Off

  • Concern on China August import slump which raise question over sharper slowdown (seems priced in or ignored)
  • Glencore in spotlight – share rose after talk of restructuring
  • UK retail spending stagnates in August – blame weather and later bank holiday
  • Asia slowing economies and oversupply in oil markets add pressure for lower prices
Turnaround Tuesday is here as global equities returned higher – risk on as weaker Yen and higher dollar – VIX sold and tamed – commodities slump continues – potentially short covering here?

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

The dollar is consolidating below the big resistance line of the ascending triangle formation. Timing of the FOMC statement shall paint a clear picture if we see a break above to take out previous high. Hints of no rate hike may well see a few days of large sell off in the dollar index as traders lose faith in the rate hike story.

German Bund

Daily

4 hour

155 levels are proving to be a resistance as the recent rally hit 61.8% Fib retracement. Bunds daily chart is currently trading above the 20 ma which add a certain indication that bulls remain in control for now. Resistance comes in again at the daily 200 ma and then it will be make or break time for Bunds.

Eur/Usd

Daily

4 hour

Euro managed to find support at 1.108 and this will be the line in the sand – next week FOMC statement will determine key battles between the bulls and bears – break above 1.13 could see a reverse trade higher if the Fed fail to signal a rate hike. Otherwise, the shorts are piling in on the trade to parity.

German Dax

Daily

4 hour

The selloff has abated and China came to the rescue again with VIX being sold – the world is fine once again it seems. Risk on to start this week as the long yen holder rotated their positions as Shinjo Abe continue to rule with his Abenomics. Weaker yen has certainly spark Risk On trade and now Dax is on the make or break here. It has produced a higher low and now in need for a higher high – potentially targeting previous gaps that has yet to be filled.

Gold

Daily

4 hour

As per our previous analysis, the break and close below 20 daily ma means lower prices and we have achieved that. The interesting aspect here lies on the current price action that is holding on support at 1115 levels – these are key levels and line in the sand for either further upside or potentially retest lower. In the short term, gold could test 20 ma and rejection will not be a surprise here. Only a close and break above 20 ma will get us long again.

Silver

Daily

4 hour

Post Chinese economic data, Silver prices has risen but is this just a short term rally as we have seen a couple of days – rallies are sold but strong support remains above 14.35 levels and resistance at 14.98 levels. Post FOMC statement will clear the air so currently we expect range trading within this tight rectangle. Understandably, the daily and 4 hour RSI is also coming to resistance but the picture remain murky.

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