Another High Volatility Week – Inter Market Analysis

Risk On

  • Rising dollar should help risk on equities higher – Bonds sell off help abate the short term trend
  • ECB Draghi speaks – often a risk on event – but wary that post speech a Risk Off event
  • Post Draghi we have Yellen Thursday speech – Central banks remain dovish

Risk Off

  • Poor Caixin Manufacturing PMI from china sent global equities lower
  • French Manufacturing PMI comes in better but Germany came in poor while EU slightly lower than expected
  • VW scandal could widen scope of investigation – snowball effect among the car industry
  • Eurozone business growth slows in September as Asian demand weakens
Extra dovish foundation build by global central banks – summer correction is in process but once this is over a series of stimulus effect should have presence. Unless of course we have another black swan event or sudden lack of liquidity. Remember central banks are backing the economy and will do whatever it takes to save it. For today only, Draghi will jawbone Euro lower but post Draghi we may see a reversal.

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

Short term looks overbought but the dollar could still propel higher on the hopes of a rate hike as early as October. The dollar index is still in a process of higher high and higher low – a break out of the ascending triangle will certainly mark an important turnaround. We feel that the dollar crowd is in a sort of distribution phase and not really sure how much longer the US economy can sustain a strong dollar.

German Bund

Daily

4 hour

Post FOMC and Bunds remain well bid since we have weakness in Dax although we felt that price action is starting to get heavy and unwinding the FOMC trade could be in the cards. Short term we will look for bearish signal for a pullback.

Eur/Usd

Daily

4 hour

Should Mr. Draghi hurt the Euro lower, we are interested at 1.0301 as a potential entry zone for a long since the dollar could hit resistance. Lower time frames has RSI build up for a potential base but it will depends on the reaction on the Euro if we ever get there.

German Dax

Daily

4 hour

4 hour chart shows we are in a downtrend channel and the overall sentiment is to sell on rallies until we see a breakout of it. Current price action reacted positively and we expect a series of consolidation before another leg lower.

Gold

Daily

4 hour

As per the 4 hour chart, there are several key support levels to keep this inverse right hand shoulder of the daily IHS formation to work. Failure to hold above 1110 will spell trouble and invalidate this formation while a break of the neckline at 1143 could potentially kick start a move higher to test 1185 levels.

Silver

Daily

4 hour

Price bounced above the 20 daily ma which is positive for silver to test higher. We mentioned yesterday that a pullback is healthy and now we need to see a strong rebound to take out previous high. Buyers who entered late should have the opportunity to go enter long position with a stop at the daily 20 ma. Should the 20 ma cross above the 50 ma, we could get higher prices.

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