· US plays down the threat on China with their Sea patrol operations
· China has conditions to keep economy at medium to high / Looking to speed up reform of the Financial system (Forexlive)
· Asian stocks mixed though Hong Kong pared better and European stocks started in positive territory – retaining most of the gains made
· More demise in the banking sector – Standard chartered to cut jobs and raise 5.1 billion dollars in new capital. Meanwhile UBS earnings beat thanks to a tax benefit.
· Turkey Erdagon won in a landslide – should bring stability
· Porsche implicated in VW emissions scandal – surprising on the slow investigation
· Commodities continue to suffer after the end of the dead cat bounce – news from China is that Steel rebar prices plummeted
· Exports down to lowest level since 2009 said British Chambers of Commerce and delivery firm DHL
· New month and positive outflow should see through November as the build-up for Santa rally looks imminent
Extra Stimulus has yet to kick in but wary of the build up to Santa rally. We would like to add the possibility of a mini rate hike tantrum as we head into December FOMC meeting. Despite that, additional QE from the ECB must not be ignored.
Multi Time Frame Analysis
Weaker dollar index post FOMC statement does not instil confidence among those in the bull camp. Currently, price action found support at 38.2% retracement for a mini bounce before another pullback lower.
“The daily dollar chart may have indicated bull exhaustion and pullback is in the cards. We could play out a mini zig zag consolidation mode or a severe run lower though we think it will be in a controlled manner. As indicated in the chart, there are several possibilities that the dollar index could play out in the next few weeks before more central banks speeches and intervention.”
Bunds did as we envisaged, found support off the lower Bollinger band of the 4 hour chart and the 100 ma. Price action is consolidating and could play out a recovery for higher prices. We have marked on the 4 hour chart potential entry for long at 156.58 with a tight stop to target previous high.
“We have a Thursday sell off and current price action is retracing to at least 50% or 61.8% fib before it self another directional play. Our biased is for lower numbers into the weekend with decent support off the lower Bollinger band of the 4 hour chart as well as the 100 ma.”
Sellers look desperate here trying to find new sellers to take on their positions. It may be too early to go against the trend but it is growing likely that we could see a reversal in play. News from this Friday NFP data could certainly create the catalyst for the next directional play.
“Euro is now trading within a nice downtrend channel and may have found support but we cannot rule out a break lower. The momentum for lower prices is there and sellers been rife to make sure that parity is achievable soon. Mind you, the short trade may have gone heavy here and one sided so a snapback could splash some reality that market does not go in one straight line but zig zag (maybe the new normal is different).”
No change here unless we break below 10680 to invalidate the move higher for a small pullback. The current thesis is that we could see a weak euro – this will fit in with higher dax before a more severe sell off. The high at 10920 stands out as it is close to psychological level of 11000 but higher target of 11200 is still valid.
“Dax broke higher as lower time frames suggest an small inverse head and shoulder with a target of 10920 that was reached. There is no questioning that Dax can still target 11100 to 11200 in the next few weeks. Daily price action could play out a wave 4 pattern here before one more spike higher or a complete AB=CD formation. “
Seller dominates the gold market and the reversal is back on – hedge funds unwinding from their long positions as we close the month of October. Price action suggest that we are due to see minor support at 1118 to 1125 levels if gold is to trade within the bigger bear flag formation. Otherwise, a pullback as deep as 1104 remains in the card and we could well see a head and shoulder formation that target lower number.
“Post FOMC statement gave the dollar big boost and with gold spiking as high as previous resistance zone at 1182. Sellers re appears on the news that the Federal Reserve is considering a rate hike in December. Equities rally and safe haven commodities are sold off.”
We continue to analyse silver price action in a simple manner. As long as it break and hold below its daily 20 ma, price could continue lower and if we drill into the weekly chart, silver have had a stab at the top of the Bollinger band to then fail lower. The spike was what we have waited for and the momentum should carry the white metal lower. Any pullback higher is a selling opportunity.
“Given 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.”