Euro Slayer – Inter Market Analysis

Risk On

  • Vix remain contained for now although there are concern for a potential run up base on technical
  • China says outflow normal and no flight to capital safety – though money out of the country remain a major concern
  • Spanish unemployment falls to 2011 low
  • Daimler profit jumps amid record sales
  • London house frenzy set to return as UK Chinese relationship improved
  • Growing appeal for German stocks after severe correction

Risk Off

  • Emerging market stocks drop on growth concern while Europe open higher pre Draghi speech
  • Asian shares mixed to negative – Samsung and Japanese drug maker (related with Valeant spill over) all took big hits
  • Revenue misses and profit warning does not seems to matter but it will play catch up eventually
  • Korean Won retreated – risk off sentiment while the Yen strengthened against the USD
European equities are held higher with good support to target higher grounds. Talk of qualitative easing will be beneficial and the Euro has begun selling off giving way to potentially another Draghi Bazooka. Expect flurry of QE induced spikes and dump but also take into account the possibility of a reversal trade.

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

Dollar index is biding its time here as it consolidate after setting up a 5 days rally – cracks are seen as Yen found some strength today while NZD found buyers too. Hint of more QE from ECB will spark buying interest in the dollar index but we will not be surprise to see a counter move – will have eyes on how big this counter move is but we felt it will go nowhere as it line up for FOMC week.

Dollar index continue to consolidate as we head to several key risk events such as the ECB, FOMC and BOJ. Sentiment remains on the dovish side that the global economy would prefer more easing and no rate hike. If we see another delay in rate hike or the Fed fail to provide any clear view then we expect more sell off.”

German Bund

Daily

4 hour

All the sellers disappear as we approach to ECB meeting while the daily 200 ma held like a champ. Bunds could continue to trade within this tight range and the outcome of the meeting could instigate the next directional move.

Daily chart is showing bull exhaustion here as we mentioned in our last few posts that a sell off will ensue but it is a matter of time. The daily 200 ma continue to act as a strong support but for how much longer? Mind you the ascending channel continues to look like a steep bear flag but the 4 hour 200 ma will get tested for support.”

Eur/Usd

Daily

4 hour

Profit taking ahead of the ECB meeting is a wise move and increasingly, ECB members are considering to expand QE programmes due to low inflation numbers. Draghi could project another negative to rather stable outlook on growth but concerns are there for them to do more.

1.15 proves too much for the bull to take out but a corrective pullback is underway here. If we get an impulsive sell off, then it will put the latest bullish run into question. Ideally, the daily 100 and 200 ma should be the target of this pullback where we find strong support.”

German Dax

Daily

4 hour

No change in the view that we see higher Dax first but will be wary if we hit the 300 to 450 range.

With the bears unable to drive prices lower and the dax 10000 psychological level defended, there is only one way which is up. The QE induced trade has also benefit from talk from ECB officials about expanding QE programmes. Despite the late sell off in Chinese equity market, dax has succumbed to more buyers. Pullback could happen but that will need a break below the 4 hour 20 ma and 200 ma

Gold

Daily

4 hour

Either the bulls overstay their welcome or we could get a decent bounce before the end of the week. We seek the latter and will look to build short positions on any spike.

Momentum is bullish and mainstream is bullish on gold – price continue to consolidate and open interest is elevated – signs of more bullishness in the yellow metal. We remain open to the idea that smart money is playing the metal higher and it is a matter of time that it reverts back to its original trend.”

Silver

Daily

4 hour

The corrective move continues and there has not been any impulsive selling yet. The 4 hour 100 ma is key but the next support comes in from the 200 ma. We still see a break lower on Silver and any spikes are selling opportunities.

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