Draghi’s Helicopter Confetti

  • Post “Precious Metal Bludgeoned” report indicate how risk reward has changed
  • Dollar index bludgeoned last week – exodus of dollar long
  • Basket of goods against the USD have put up an amazing rally post ECB & NFP
  • Draghi went in so close yet so far – market hugely disappointed
  • When NFP numbers come in better than expected and the dollar is sold…
  • As the selling sentiment turned far too one-sided, the market snapped higher
  • Will this last? Read on as we think there are twist and turn
  • VIX did a round of roller coaster ride
  • Price action expected to consolidate or resume its course with sentiment much more cautious
  • OPEC decision saw oil trade below $ 40 – no cut in production
  • Next week saw big line up of Central Banks speakers from Kuroda, Carney, Poloz and Jordan
  • Chinese CPI numbers and trade balance holds the key while Japan will post its GDP numbers – potentially paint a picture of the global economy 4th quarter performance

VIX

Weekly

As the Euro surged higher (big short covering action), the risk off sentiment caused a big spike in VIX. It was a short-lived euphoria as sellers return hard on, created a strong rejection candle which suggest more weakness is about to come. We felt that the VIX is showing signs of what is about to come and the FOMC event will certainly bring about big volatility that could well alter the market.

Daily

Dollar Technical Outlook

Well what a week it has been – kicking off the last trading month of the year with a bang. Mr Draghi was the highlight after coming in so close yet so far. It was an outcry in the market as a big U-turn signs was posted on the dollar index, taking down as many wrong-footed traders as possible. It was a super Thursday or also a nasty one to the late comers. Dollar bull was set to break higher but post ECB has triggered an exodus – with everyone running out of the exit. A weekly bearish engulfing candle does not bode confidence into next week – yes we expect more weakness but are also wary that a massive “V” shape recovery could be underway as we head into the next risk events.

Technically, the daily chart has a potential of a megaphone formation – thus a short term dollar recovery cannot be rule out. A short term bounce to retest what was once support now resistance at 12150 is possible. The other scenario is a complete “V” shape recovery that we mentioned above (watch the daily chart that has a potential double bottom).

Dollar index is setting up for a bull flag breakout to the upside and a potential AB=CD formation at play. After October low, the bull has returned with a vengeance and these setups for a strong end to the dollar. This view remains viable as long as the ECB deliver on more QE – devaluing the Euro while the FOMC reaffirm their intention for a December rate hike. The only possibility that the dollar index derail from this are – ECB and the FOMC out with the opposite surprises (highly unlikely) or Chinese yuan devaluation.”

Weekly

 

Daily

Gold Technical Outlook

Mario shoot blanks was the theme from last week – allowing gold to rocket higher. As we highlighted last week, the risk reward has changed and a bounced is in store. Looking ahead into next week, we cannot rule out a retest of last week high – potentially tripping above but we are wary of a dollar index recovery as we head into FOMC 16th December meeting. Note that Draghi came out to keep the Euro advance under the lid.

Technically, gold should advance next week after posting a bullish engulfing candle. Short covering action and failure to find fresh sellers has made the bounce possible with resistance now standing at 1098 and 1117.

As highlighted in last week report, we stressed how gold is set to make another new low. Post Thanksgivings, traders return and gold plummeted lower based on several reasons. First was China equity market sell off, technical weakness as previous low at 1063 does not offer much support, SNB rumour that send USD higher and a rather unlikely rumour that ECB may not add on their current QE programme. The risk reward has certainly changed as we envisage a likely bounce which could play out during December risk events (ECB/FOMC). We cannot rule out a retest lower but a bounce is certainly in store.”

Position Valid Date Price Action Stop Loss Target Results
LONG   1050 Live 1030 moved to 1060 1100  

Weekly

2014 Gold Price:

2015 Gold Price:

Silver Technical Outlook

As per last week report, we entered a short term long on Silver on the break of the daily 20 ma at 14.22 and stops have been raised for break-even. Our modest target is at 14.85 and then we will re-assess where silver prices could go. Our long term scenario is a new low in Silver again before a see a much higher rally.

With gold making a new low, Silver managed to stay just above 13.89 – potentially suggesting that there are no new sellers to absorb the current price action. Overall sentiment remain bearish and the sellers are in control but we cannot rule out that this consolidation phase will remain range trading before we see any spark to the upside. As a guideline, we will only enter a short-term long if price managed to break and close above its 20 ma.”

Position Valid Date Price Action Stop Loss Target Results
LONG   14.22 Live 14.22 14.85  

Weekly

Daily

Platinum Technical Outlook

The anticipated short term bounce is underway but we will remain cautious and cancel our previous long order for now. More often than not, the market is showing signs of mixed sentiments and we remain steadfast that this could just be a one-off short term bounce – potentially with more selling in the next few weeks. Watch this space as Platinum could make lower low again.

As long the Chinese market continues to wobble with their economic growth, prospect for higher platinum prices is low. If there are production cuts, it could help reduce the selling pressure. Any marked improvement in the Automobile industry could also alleviate but technical picture suggest another test lower is in store. Given that the larger timeframe suggest an RSI divergence, we have placed an order to long platinum for a short term bounce with tight stop.”

Position Valid Date Price Action Stop Loss Target Results
LONG   795 Cancelled 785 840  

Weekly

Daily

Palladium Technical Outlook

We stick with our long trade and yes it is rare that we got filled on Palladium and running in profit. No change in strategy but we will let this run and trail accordingly.

We maintain our outlook as per last week – current price action seems to suggest that palladium could well have hit bottom. Scrolling out the chart back to 2011 there is support here and a potential triple bottom. Buyers flock in at 530 levels and as long as buying interest appear here then expect a return to the upper channel.”

Position Valid Date Price Action Stop Loss Target Results
LONG   525 Live 505 moved to 535 610  

Weekly

This article is written according to the author’s views and by no means indicates investment purpose.

 

 

 

 

 

 

 

 

 

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