Market Testing Yellen’s Bluff – Inter Market Analysis

Risk On

  • Inflation data across the Eurozone countries came in line as expected – all eyes will fall on US retail sales and PPI numbers – release of Biege book
  • South Korea unemployment rate came in at 3.5% against 3.6% forecast ABInbev buy SABMiller for £68 billion – pound benefited – an OPEC of Beer?
  • Sales rose in Land Rover – demand in US

Risk Off

  • Poor Chinese CPI numbers sparks deflationary fear – lack of demand and price competition hurts the bottom line for Chinese firms/ Potentially the aftermath of the equity rout that has left many consumers cut back in spending (promise of additional stimulus)
  • Nikkei closes down and Asian equity suffered after series of poor data and weak US equity market
  • China 3rd quarter growth seen dipping to 6.8% – weakest since 2009
  • Meanwhile, Singapore narrowly averts recession ins Q3
  • Japan Amari san said it’s too soon to speak about new stimulus
  • Dollar weakness continues as Euro demand higher prices – risk off sentiment maintain its reign – money out of the dollar finding safe haven in precious metals
Equity markets opens weaker today after weakness from the US market – slowdown in global growth continue to be the forefront of the concern – risk of recession increased while VIX may seem to have find support after gap fill. Poor earning seasons could seriously deter new money into equity market – dollar turnaround as the market is testing the Fed on their true intention to implement a rate hike.

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

A breakout was a short lived bear flag formation and weakness could continue from here unless price action managed to find a double bottom type of support or at least a retest of the daily 200 ma. With no incentive for a rate hike, the dollar bull continues to exit in this crowded trade.

Daily chart seems to suggest the usual support should kick in but failure to do so may well kick start a very severe turnaround.”

German Bund

Daily

4 hour

Watch how the daily chart has its bollinger band converging. Bunds had the pullback that we mentioned yesterday and buyers showed up again although it has yet able to break past the resistance at 156.70 levels. A break and close above is necessary to see higher prices while we could expect a short term consolidation first.

We warned about the potential recovery in Bunds and hope many shorts have covered. The bounce from the daily 200 ma and a double bottom is a strong enough signal for a recovery. Bunds could test higher on a break of 156.80 so pullback is a potential buy.”

Eur/Usd

Daily

4 hour

Lower time frame seems to suggest that we may have a bull exhaustion – given the 4 hour chart shows a potential wedge and RSI diverging. As long as Dollar index find support in time before FOMC, we could assume that we will see the Euro pullback.

No respite here as the Euro continue to unwind the short – dollar weakness only add to the break higher but on the 4 hour time frame we may have to assess if it needs a pullback first. The buying is not impulsive and we see how price action is building strong staircase of support. Seasonality of dollar weakness also spur demand for the Euro trade.”

German Dax

Daily

4 hour

Dax close below the psychological level of 10000 as per mentioned yesterday and the selling has been rather orderly. There was no impulsive move to the downside though on a technical level, a break below the 4 hour 100 ma may take prices lower to test 9700 levels.

Well the daily Doji suggest that buyers met with resistance here and a pullback that we mentioned which was overdue could be playing out today. As long as it close below 10000 psychological level, we could see follow through selling on DAX.”

Gold

Daily

4 hour

Gold continue its move higher – breaking past 1 month high and running at its best for the year. The pullback was corrective and talks in the market are for higher prices. We remain sceptical and any news that revives the rate hike talk will certainly throw the bulls a cold hard reality splash. Price action is touting the Fed for delaying rate hike for 2015.

Silver

Daily

4 hour

No change in our view for now – 4 hour chart shows a potential pullback that is long overdue after many sessions of short covering. Talk of additional stimulus from China may also gave the Silver prices a boost but other than that we are not sure if this industrial metal can rise further.

Perfect alignment with a potential triple top around 16.10 levels after price action retest with an RSI that was diverging heavily thus sellers dominate. Dollar come to short term support could easily push Silver lower as per previous commentary.”

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