Yellen Mind Game – Inter Market Analysis

Risk On

  • US jobless claims came in lower than expected – indicate ongoing strength
  • ECB Coeure says Asset purchases to continue as long as needed – help sustain European equities higher for now

Risk Off

  • Fed decision next week will lead to further uncertainty – expect traders moving to cash and reduce risk on – lightening up on positions before FOMC
  • Asian equities attempted to break higher with Nikkei closed lower ahead of FOMC week
  • NDRC Zhang says Chinese economy faces “relatively large” downward pressure – Mr Zhang might be prosecuted soon or we will not see his commentary again
  • Russia and Syria alliance cause concern of ongoing unrest in the Middle East
  • Stronger Yen and Euro – dollar weakness across the board
  • All eyes on Chinese industrial production and retail sales to gauge its economic strength
All eyes on US PPI data this afternoon – Weekend risk event comes from Chinese industrial production number, Fixed asset management and Retail Sales – a bad number could test global equities conviction of a bullish run into next week ahead of FOMC

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

Afraid there is not much change on the dollar index outlook as it continues to consolidate – Recent weakness is contributed to traders positioning ahead of FOMC week. The take away is that a rate hike is imminent so shorting the dollar is far riskier than holding long dollar. Dollar bulls are holding strong as daily price action remains above the 20 ma. Next big move will be very much FOMC dependant.

German Bund

Daily

4 hour

The 4 hour time frame suggests the RSI is diverging on the bearish side and price action has hit resistance at 155.06 levels. Traders are positioning and holding bunds as insurance – Euro moved higher as well – risk off signal. Meanwhile, price action continues to range trade and only a break below 154.30 will mean a retest lower. Certainly a make or break going into next week.

Eur/Usd

Daily

4 hour

The silent Euro has broken higher against all odds – dollar index revolving out on the long trade – lightening up ahead of the FOMC week. Only a break higher and close from previous September high will allow further continuation higher. Technically, we prefer a pullback before another push higher but we will remain cautious for now.

German Dax

Daily

4 hour

DAX is still trending with higher low in the ascending triangle pattern. No surprise there as the average trade range will get tighter going into the end of the week. Only a break out of the triangle could set the next big directional play – current formation still indicate a retest lower first before higher since this look more like a bearish wedge. On a bigger picture, a retest lower to flush out weak hands is still in play.

Gold

Daily

4 hour

Gold price action respect previous support now resistance at 1115 – a retest was in the cards and a strong rejection off that levels confirm the bears are in control. Yesterday price action suggest a bear flag formation while 1100 will be key support as a break below will indicate further weakness. Going into FOMC, we expect a tighter range and any longs shaken out – view from SAXO Ole Hansen suggest a rate hike will give certainty – which could let gold rise higher.

Silver

Daily

4 hour

Is the 4 hour forming a sort of cup pattern as it curve lower? Price failed to break higher on several attempts in closing above 20 daily ma – showing that sellers remain strong – d amount of wicks show strong rejection time and again. It does look like a strong case for a well-informed buyer that is accumulating at these prices or well informed sellers. This is something to ponder on as we head towards FOMC next week.

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