Let October Begin – Inter Market Analysis

Risk On

  • Final quarter and beginning of October buying bring about fresh risk on sentiment
  • Emerging market stocks rose for second successive days – China slowdown claimed to have stabilized – confidence streaming back
  • Yellen speech was a non-event while overnight data from Japan and China point to stabilised market despite a poor US Chicago PMI but ADP numbers from the US is well received
  • All eyes on US ISM manufacturing PMI that could give extra boost to the dollar – with Euro and Yen much weaker – VIX sell off and safe haven trade unwinds
  • Glencore advances for 4rd day to wipe out Monday record loss – commodity currency benefited with Aussie dollar leading

Risk Off

  • Russia begins Syria air strikes
  • UK private sector growth slows in September CBI
  • Reuters report Shaky China (currently on National Holiday remains vulnerable)
With China out of the market and producing a rather mixed (contraction) but market deemed stabilised data – risk on sentiment kicked in and front run the additional talk of stimulus and change of policy that could sustain growth out of China. NFP numbers are expected to come in better than expected and the market may have already priced in for a stronger dollar – equity rose – VIX lower – beginning of the month buying is underway – foundation for OPEX.

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

Other than the US dollar index to watch out for – the USD/YEN is another piece of puzzle that could trigger the risk on and off sentiment as we head to Friday NFP report. Market is expecting a better number which should have been priced in but any surprises on the up or downside in the numbers may well contradict our argument. Technically, the dollar is consolidating and converging ever tighter for yet another breakout. A breach below the 4 hourly magenta line could spark some swift sell off yet again.

German Bund

Daily

4 hour

Price continues to linger at potential reversal zone that we earmarked but has yet made any traction. Demand for Bunds remains high thought we argued on technical levels it look heavy but well bid. It may take a big shift in sentiment to get Bunds moving in a larger range.

Eur/Usd

Daily

4 hour

The selling zone that we marked out has once again formed a strong resistance for Euro to break higher. Sellers prevail but today price action has moved to a buyer’s zone – all of this price action is converging nicely within the symmetrical triangle. Needless to say that Friday NFP data will take out either one of the zones.

German Dax

Daily

4 hour

Dax broke above the sell zone and need to close above it today to confirm the next leg higher for 10 k levels. However, there are 2 unfilled gaps below and on the 4 hour chart – potential EW count has completed all 5 on the thrust higher and we could envisage a corrective ABC move lower to retest the green buy zone (see 4 hour chart).

Gold

Daily

4 hour

Once again gold is at a make or break scenario. We initially identified a potential head and shoulder formation but the latest bout of weakness has taken price as low as the rising channel (see daily chart). It has come once again at a decent support level which confluence with the rising channel and also 76.8% fib retracement of the last move low to high. Tomorrow NFP will determine either we break below the rising channel or break out from the downward sloping channel to a retest higher.

Silver

Daily

4 hour

Depending on NFP numbers – we expect a flurry of whipsaw action but the 4 hour chart is suggesting a potential breakout to the upside if a 4 hr candles can close above the 100 ma. The Bollinger band is converging ever tighter. However, a big jolt out of the rising channel could mean a big sharp fall to retest below 14.00 levels.

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