Short Term Dollar Weakness Continues – Inter Market Analysis

Risk On

  • Asia equities moved higher on the back of Kuroda’s speech European equities follow suit – led by commodity, miners and energy shares
  • Samsung surges as profit beats estimates
  • BOJ Kuroda says Tankan survey shows firms are prepared to invest but not ready for wage hike it seems…
  • The VIX fear index is sold – increasing RISK on sentiment despite poor series of economic data (bad news is good news now) / Bunds sell off added fuel to risk on sentiment (long overdue)
  • ABinbev offers £68 billion for SABMiller – FTSE up / Heineken buys brewing stakes from Diageo
  • August UK industrial production up 1% vs 0.3% – more reason for rate hike now? Will Carney make the same mistake as the FED?

Risk Off

  • Air France cut work force / German industrial production -1.2% (VW scandal yet to be added) / Spain industrial production numbers for August came in worse than expected
  • YUM brands plunges after sluggish sales in China – dragged down earnings
  • German Factory Orders unexpectedly fall in sign of economic risk (has not taken VW into effect) coupled that with the weak NFP – no rate hike for October?
  • Oil into resistance – commodity currency all enjoy higher prices – revival of a weaker dollar – the post NFP effect is being felt
Not much has changed across the positive run in equity market – very much buoyed by bad news equal to good news – market is chasing prices despite it look extended but with weaker dollar – commodity currencies are given the boost – earning seasons come in play. Again we stress that a pullback in equity market is healthy for higher high.

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

Prior to the release of FED meeting minutes and FOMC – the dollar bull are busy heading to the exit door – trader are piling in on short and switched to other asset class – weakness here could remain temporary in our view given that Yellen stress “at least 1 rate hike in 2015”

German Bund

Daily

4 hour

Bunds price action is fast approaching the daily 200 ma which confluence with 20 dma as potential support zone. A break below will target the 50 dma – weaknesses on the Bunds haver instigated more risk on trade – and we cannot rule out further weakness here.

Eur/Usd

Daily

4 hour

Euro trade continue to swing within the range of seller and buyers zone – but there is not one convicted buyer or seller. As previously explained, price action is biding time for a big directional move.

Note on the daily chart price action has produced a lower high and higher low – converging in a symmetrical triangle – potentially could see a breakout. Meanwhile, the 4 hour chart is also showing a potential bear flag formation with an AB=CD. Fed meeting minutes could give some short term directional play.”

German Dax

Daily

4 hours

Daily chart is very bullish and there is room for higher prices as we break through the psychological price level of 10000 – initially targeting 10200 as long as the Euro dollar trade does not break higher and assuming the Bunds weakness continues. Again, we think a pullback will be healthy.

Gold

Daily

4 hours

No change in our commentary though we are starting to lean to a bearish conclusion (need confirmation from daily chart)

Well we have a bad NFP numbers and gold found support at 1104.50 – adding upon layers of support at the 1095 – 1105 zones – and only a break below this level will trigger a bigger sell off for 1070. Otherwise, the daily chart has a large symmetrical triangle formation with lower high and higher low – price action is converging for a big directional breakout play. Often, this formation is a continuous price action – with the overall trend lower then we cannot rule out a break lower. Only if we break and close above 1155 then we could head a lot higher.

Silver

Daily

4 hour

Daily chart, silver looks overextended although it still has a bullish momentum as it trade above the 20 ma and 50 ma crossing. However, we are leaning to short term pullback to retest support zones before another strike higher. Right now, we are waiting for daily chart to confirm a short trade for this pullback since it hit the daily 200 ma and often this is a big resistance.

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