Overall trend is still bullish – dollar index has traded sideways since 2015 after hitting double top. As we are entering to the last trading quarter, expect seasonality to play out which favour a weaker dollar index. With the rate hike priced in, we remain steadfast that a strong dollar is not favourable in the medium to long run. Take note that end of this month we have the debt ceiling discussion – food for thought.
Price action is converging tighter with series of higher high after the major sell off in May. Can we consider the current price action to trickle higher in a Bear Flag formation? The ECB could look to expand their QE programme so all bets are off as to where Bunds might go except higher.
Well the safe haven trade continue to play out with rising Euro – on the contrary the VIX fear index sell off one day prior to FOMC – no fear as we go head on. Depending on the result from FOMC, can Euro continue its rise? We spotted a potential AB=CD formation targeting 1.48. However, a break below 1.10 will open up the gates to euro parity once again. Lately, the ECB has increased talks on additional QE but only until it is implemented then we can see traction lower.
Dax is not out of the woods yet since talk of additional QE has not inspired higher prices. Until the additional QE has been implemented, then we see higher Dax. Meanwhile, price action is still lingering in a bear flag formation (potentially wave 4 out of 5). One more flush lower could spark a daily RSI divergence. On the event that we get a bullish run, Dax could well target the 200 SMA which sits at 10827 as of the time of writing. The 200 SMA could head lower, ideally to 61.8% retracement from the sell off (this has a lot of confluence zone)
Trend is still valid for more downside since the rebound has not transpire into any significant rally. Short term rallies often met with sellers and is this time going to be any different? Just maybe because post FOMC, the landscape may have change – given that the sell off in gold is due to rate hike = higher dollar = lower gold – but since that has been priced in – will the dollar head lower to give support to the yellow metal until end of the year? We remain adamant to sell at higher prices.
Sellers remain in control as the overall trend remain bearish. It is true that price has break and close above the 20 daily ma but FOMC could move market and we will not rule out another sell off. IG sentiment has 88% long on silver, thus a big flush lower could take out weak longs before another end of year seasonality rally.