September Madness Ending? Inter Market Analysis

Risk On

  • Rebound galore as Miss Yellen assert certainty of a rate hike later this year
  • Poor Japanese data added pressure of extra stimulus
  • ECB members suggest December additional QE programme
  • A stronger rebound on the dollar force a risk on – USD/YEN and EUR/USD trade went to reverse
  • Yellen need to rate hike so Fed can be flexible and cut rate again if severe economic condition took a turn
  • US second quarter GDP growth revised up – China see steady growth to achieve 7%

Risk Off

  • Emerging market carnage – strong dollar add pressure for EM banks to intervene
  • China stocks derail – Japan Nikkei play catch up – Europe open with flurry
  • Boehner to resign – Debt ceiling into consideration (see our weekly report)
Every FOMC statement followed by Miss Yellen individual speech has a large degree of contrast – she flipped the overall dovish September FOMC statement to hawkish – which took the market by surprise again. Short term risk on is at play while the medium term risk is the aftermath of a rate hike (potentially lower dollar and equity prices?)

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

As per previous drawn channel, price action looks contained within and should continue to bounce on an upward trajectory. With Yellen comment that a rate hike will happen later this year, it easily took the crowd to back the dollar. Given this consolidation phase, we cannot rule out a rather choppy session – despite a better US GDP numbers – Mr. Boehner resignation could spun uncertainty in the US market.

German Bund

Daily

4 hour

No additional comment needed from previous post.

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 hours

The sell off began a few hours prior to Yellen’s speech – which resulted in strong dollar and a timely unwinding of euro long – risk on. Today we have buyers step in and create another layer of support at 1.1118 levels and the structure still stand that Euro could go higher from here. It will take a major catalyst to break this – given that we have a better US GDP data – unless we have ECB committing to do QE.

German Dax

Daily

4 hours

We have broken out of the downtrend channel that was previously drawn on the 4 hour chart. RSI is also diverging on the bullish side and Dax price action reacted positively from the low of 9370 as sellers run out of steam – an elastic snap back occur but the next candle on the 4 hour will determine if we get another positive move higher or consolidation. We felt that a pullback is due and we could have one before a retest higher.

Gold

Daily

4 hour

Price broke above 1143 and stopped at 100 daily ma which also coincide with the downward channel. A pullback to retest breakout level has occurred and if gold managed to hold on above the IHS neckline, we could kick start next week with higher prices. Should we break below then expect another round of selling to take prices much lower.

Silver

Daily

4 hour

Silver bounced higher prior to Yellen speech and the rebound from 20 dma is a positive one. However, we were expecting price to take out previous high which it has failed. Those who went long should consider taking some off the table and raise stop loss as we head to the weekend.  As long as silver trade above its daily 20 ma, we remain positive and the 20 ma is about to cross above the 50 ma which could give a big boost.

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