The Courage to Hike? Inter Market Analysis

NO MARKET UPDATE AS PER USUAL. JUST CHARTS AND THOUGHT PROCESS.

4 hour

The dollar index is lining up on its usual stance that a rate hike could happen in this statement or at least giving an indication that the Federal Reserve is ready to do so. Yellen promised one hike for 2015 and the consensus says she is to disappoint – thus the dollar index has not priced in a rate hike scenario or has it?

β€œThe rallies that wait for no man – it is either you are in from the lower end of the channel or die chasing it. A rather straightforward trade but the risk here remains clear – that Miss Yellen could remain dovish. However, we are aware that ECB and PBOC have been extra dovish which could set the tone for Miss Yellen to jawbone the dollar to the way she see fit.”

German Bund

Daily

4 hour

With the high expectation of additional QE, this is a a one way street for the bunds. The 4 hour chart indicates possible bull exhaustion and a pullback will indeed be very healthy for the market place. Without a blow off top confirmation, price discovery can continue higher.

β€œThe daily chart that says do not fight central banks and no short sellers please. Price action has remained elevated after ECB clear intention that December meeting will determine additional stimulus announcement. It remains unclear how much more but it is enough to send the bunds higher.”

Eur/Usd

Daily

4 hour

Overall trend remain bearish and traders are staying flat until they hear more about the FOMC statement. Dovish dollar statement could easily send the Euro flying in reversal as it continues to trade in the large bear flag. Otherwise, the opposite is true – stronger dollar can finally be the final straw that took the euro down to lower numbers. Afraid we have no crystal ball to predict the future here.

β€œMinor support is holding the Euro above the psychological level of 1.100 and current price action is undergoing consolidation phase. This period also emphasise that sellers are in control right now and further weakness cannot be rule out. As we head to FOMC, only a severe dollar weakness can really reverse the current trend.”

German Dax

Daily

4 hour

We have a bull flag formation on the 4 hour and price has broken out of it. Price action this morning was to trap short at 680 levels and despite VW large losses, investors snapped up a quick rally – either a short covering before the FOMC or real buyers are stepping up again here. A pullback from here is still an ideal scenario to reload on longs to go higher.

β€œDax hit 50% Fib retracement and has made a double top – with a pullback in the short term as the very likely scenario. There are many unfilled gaps below that needs to be addressed and as long as we maintain within the rising channel (4 hour chart), the ideal price action is to see a pullback to 38.2% move of the breakout level which sits at 10485 levels.”

Gold

Daily

4 hour

The yellow metal looks ready for a launch higher. Bull flag in the 4 hour chart and support at 1158 remains solid. Potential projection is to take out 1180 and previous high for 1200 and higher. Medium term outlook, we will look to short any spikes.

β€œThe bulls overstayed and despite talks of additional QE from the ECB and rate cuts from PBOC, gold failed to take out 1180 which is now key resistance that could open up rooms for prices to test higher. Only a close and break above 1180 can convince the bulls to take out 1191 and 1200 levels. A break below 1138 may spell trouble as price action could play out the lower range of the bear flag.”

Silver

Daily

4 hour

Similar to gold, the white metal is poised for a break higher here but failure could spell trouble in the weeks ahead. A big spike could well be a decent opportunity to short.

β€œGiven the recent price action, we are re-assessing that the structure remain solid for a retest higher. Price action is consolidating very well at the higher end of the price range but our medium term thesis remains to short on the next spike. Buyers are holding strong for higher prices and if the FOMC is dovish, we could well have this pattern to play out.”

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