Dominant Dollar

  • Precious Metals plummeted – Gold down 8 days straight / Silver 7 days
  • Dollar bull in euphoria – with well above 50% confirmation of a rate hike in December
  • Equity market took some shining off but bulls remain in charge
  • Post NFP numbers – market should expect to see strong rebound in US economic data to further press on rate hike talk

December 2015 is lift off month and Yellen made the dream come true for every dollar bull. King dollar burnt a big blazing trail and made a very strong end on friday trading. Precious metals melted lower and the bullish euphoria on higher metal prices are all squashed to nil.

Economic data from China and US will further drive positive momentum in the global equity market. As long as China can sustain last week rally, the bullish rebound could continue going forward. Euro shorts increase by 28k in the current CFTC weekly data – with no sign of reversal, the momentum trade is for lower. Strong dollar will push for risk on sentiment but with a rate hike imminent, how does it all sit with the recent poor company earnings and has the market re assess future debt repayment with a minute 0.25% hike in rates?

β€œOn the other side of the pond, the US economy will also have barrage of data and it is Nonfarm payroll week. Evidence of any good data could well incite the confirmation of a December rate hike. We think that November economic data will be the last card that Miss Yellen can play in her quest of to hike or not to hike.”

Dollar Technical Outlook

We were wrong as the NFP job numbers was well higher, increasing a rate hike expectations from 53% to well above 70% (last we check). Incredible how the pace changes in the currency market while equity market remain elevated – we can only assume that rate hike is either not priced in or simply ignored. The bullish momentum has been set for next week though we will be cautious on longs and look for an exhaustion point to end the week before a pullback.

β€œLast week we highlighted the possibility of an inverse head and shoulder on the dollar weekly chart. This is still possible even when the dollar ended the week with a big red doji as buyers and sellers try to establish grounds. Daily chart shows a much clearer picture of what happened as the dollar index once again hit the top of the Bollinger band and reversed. All the FOMC hawkish gains that were made have lost its shine and we cannot rule out a rather weak dollar going into next week. This could well instigate a short squeeze on the Euro shorts – quiet possible also kick start a deeper pullback in the equity market as risk off sentiment may well sets in.”

Weekly

Daily

Gold Technical Outlook

Has the yellow metal priced in the rate hike scenario? Despite a definite hawkish comment, gold has yet broken July low – thus we raised the question if the sellers are soon running out of ammo. It is one scenario that we will take into consideration and will monitor closely what could be in store for gold as we head to the Live December FOMC meeting. The short term view is that after 8 days of selling – a pullback is due then traders will re-assess. Risk reward has changed to go long in our honest opinion.

β€œKey level at 1182 proves to be seller’s paradise and there were bull drums with higher gold prices as we went to FOMC statement. The release of the statement sets the bears free and bulls flee – gold dropped from the high to 1152 levels and ended the week lower. It is now at a crucial support level where there is a slim chance for the bull flag to work. It remains risky to go long here but there is confluence of old support from previous run higher. This also coincides with the 61.8% Fibonacci pullback. If this fails, we look for support at 1116 – 1125 levels which is the last support within the bear flag formation.”

Position Valid Date Price Action Stop Loss Target Results
LONG 26th – 30th 1142 Closed 1136 1220 -6
LONG

Weekly

Daily

Silver Technical Outlook

7 straight down days with no pullback whatsoever on the white metal but the bleeding seems to have stop at 14.70 levels for now. We highlighted in an older article that these price levels used to be the distribution phase before the run higher. There are many stops here but ideally we envisage a small rebound so the seller can resume with a force lower. We will wait for that short rebound to 20 wma and a bit higher to short again.

β€œSilver took out 16.23 for a while but did not close above it. It has similar fate as the yellow metal, euphoria that lead to sudden bluntness of brutal selling. In hindsight, it look like a very easy trade but we have warned for weeks that the rally remain unsustainable and that it is only a matter of time before it all breaks apart. We now have a bearish weekly candle and a close below 15.60 which we highlighted. The weekly and daily RSI has more rooms to head lower so we cannot rule out a complete run lower to the bottom of the bear flag. We will look to open a small short position at the open and add if Silver test a retrace higher.”

Position Valid Date Price Action Stop Loss Target Results
SHORT OPEN was 15.53 Closed 16.40 15.00 +53
SHORT 15.80 Not Filled 16.40 15.00

Weekly

Daily

Platinum Technical Outlook

We have closed one of the short positions to lock in some profit whilst leaving the other one to run and moved stops lower. Once Platinum hit the target, we will look to reassess and look to pullback to re-enter short or have a short-term long to take advantage of any bounce. We have not forgotten the possibility of an inverse head and shoulder but with a weak economic situation and tightening by the Fed-the overall trend remains lower.

β€œWell short covering season run out of steam and the reversal should hold true given that the dollar strength starts to kick in again. Seasonality also shows that end of October and going into mid-November has not been a positive month. We envisage a pullback here before a potential Inverse Head and Shoulder move higher.”

Position Valid Date Price Action Stop Loss Target Results
Short 19th – 23rd 1020 Live 1040

Moved to 1000

975 changed to 930
Short 19th -23rd 1005 Closed 1040 moved to B/E 975 +30

Weekly

Daily

Palladium Technical Outlook

Well we have the ultimate sell off and think any pullback higher is another short opportunity. After locking in the profit, we will wait and reassess but ideally look to re sell at 670 levels if we get there for lower price. A small short at 650 is also viable as it confluence with previous support and now resistance zone.

Position Valid Date Price Action Stop Loss Target Results
SHORT 695 Closed 746 moved to B/E 600 +95

Weekly

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

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