Normalisation Underway – Inter Market Analysis

Risk On

  • European August Car sales rise – in line with better industrial production number from Europe
  • All eyes on US retails sales data today – a strong sales could suggest a strong US economy
  • Chinese August fiscal spending increased 26% – one of the tools used to spark the ailing economy?
  • Apple rose on the back of a strong sales for IPhone

Risk Off

  • BOJ signalling that growth will eventually sipped in – no additional QE in store
  • Yen stronger while dollar maintain course for FOMC decision – Euro remain in consolidation mode
  • Fed decision will lead to further uncertainty – expect traders moving to cash and reduce risk on – lightening up on positions before FOMC
  • China stock closed lower again – since the start of the week – Japan Nikkei is up despite the lack of dovish remark from BOJ
  • China reform underway starting with SEO – trying to lure private money for public projects
  • Commodity remain under pressure – Trichet suggest the Fed to ignore IMF and raise rates
  • Russia positioning tanks at Syria Airfield
  • UK inflation could fall back to 0% – in need of additional stimulus? Further delaying BOE rate hike
Turnaround Tuesday and OPEX week pre FOMC – what a showdown this will be – VIX index remain high – dollar consolidating – to hike or not to hike – FOMC has to provide a stable and clear vision as we will soon enter the last trading quarter

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

Price action continues to drift lower as dollar bulls positioned ahead of FOMC decision. Daily chart shows we are fast approaching the 50% Fib retracement area and on a closer look, price action continues to form a potential bull flag formation. Note also that the 4 hour has a positive RSI divergence but we cannot rule out a retest lower. Once we have clarity from the Fed, the dollar index will play a directional role within the ascending triangle.

German Bund

Daily

4 hour

Bunds rose higher – safety in numbers and potentially it could be heading to resistance. We expect Bunds to pullback here to test for support. Somehow, the 4 hour chart shows a potential bearish wedge and if we break below 153.50 – the sell-off could accelerate.

Eur/Usd

Daily

4 hour

The Euro did break higher above September high and the pullback is in action. Safe haven buying continues as Euro is much preferred insurance going into FOMC decision. Even though price action has broken out of the bearish wedge, it found support at 38.2% from its recent high low. Euro could continue higher and big directional play will come in post FOMC.

German Dax

Daily

4 hour

With a stronger Yen, Euro and Bunds – risk off implication is high here – Dax continue to struggle after it hit resistance at 50% retracement. With price action within the ascending wedge, a break below could spell trouble – retest of previous low. The lacklustre price action is surprising despite talk of additional QE before the end of 2015.

Gold

Daily

4 hour

Daily chart has an inside day right at the low of the Bollinger band. This often indicate a potential reversal zone if price can break above 1120 levels but traders will prefer gold to take out the daily 20 ma for more confirmation of a move higher. Expect a series of tight range trading as we head to FOMC – 4 hour chart shows a bullish RSI but that remains unclear if we have seen a bottom in place. A break below 1095 will open up the door to retest 1077 again.

Silver

Daily

4 hour

On the Daily chart, we are highlighting a potential fractal in play while the 4 hour chart shows that price action has broken below and out of the bear flag. In the short term, we cannot rule out a retest lower but are open to the idea that price could easily reversed higher if we get a favourable FOMC decision. Bears remain in control here but any attempt of short covering will see an explosive rally in silver prices.

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