Intraday Market Thoughts Archives

Displaying results for week of Sep 20, 2020

USD Deleveraging & Tech Applications

Sep 23, 2020 18:16 | by Adam Button

The US dollar resumes its rally even as the mood in equity markets initally improved. USD and GBP are the top performers while the gold, silver and the Kiwi were the weakest. Below are today's metals intraday calls Ashraf gave members of the Whatsapp Broadcast Group,when gold was above 1885. If yields are falling by less than metals, would it pose fresh concern for metals? Also see later below Tuesday's idea on the DOW and neckline support-later-turned resistance pattern is found in the 4th paragraph. EURUSD hit its final target of 1.17 for 260 pips, entered at the high of Sep1st. 2 New Premium trades were issued earlier today.  Below are today's daytrading calls in XAUUSD, XAGUSD for the WBG. 
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USD Deleveraging & Tech Applications - Whatsapp Gold Silve Sep 23 2020 (Chart 1)

USDX broke above that key neckline resistance of the inverted H&S formation, coinciding with the 55-DMA.  The big question facing the FX market remains whether this is a dollar dead-cat bounce or the start of a longer retracement cycle. The price action on Tuesday highlighted the scope for further gains as it broke some technical levels and neared others. The bid in the dollar was strong and steady even as the news and market sentiment varied.

Below, is Ashraf's chart & trade idea on the DOW30 before the close of Tuesday's cash session, highlighting the 27500 neckline support turned resistance. 

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USD Deleveraging & Tech Applications - Whatsapp Dow Sep 23 2020 (Chart 2)

The steady bid in USD/JPY is certainly a curious element of the playing field as it climbs from levels that are undoubtedly a headache for Japanese officials. That extra bid could be providing some of the marginal strength in the dollar.

Another part of the equation is undoubtedly the resurgence of the virus in Europe. The UK placed a new curfew on bars and encouraged companies to allow work from home. Eurozone consumer confidence was better than anticipated on Tuesday but cases throughout the continent are moving in the wrong direction just as cold-and-flu season begins.

In the battle of easy money vs uncertainty the certain of low rates appears to be priced in while the uncertainty around the virus and US election is encouraging some deleveraging. That shift to the sidelines is helping to unwind crowded positions like long stocks and short USD.

 

The Moment of Truth?

Sep 21, 2020 23:15 | by Adam Button

There are a long list of great uncertainties in financial markets right now but those contrast with an unprecedented level of certainty about interest rates. The US dollar was the top performer while the New Zealand dollar lagged. The US Richmond Fed and existing home sales are up next. The Premium DOW30 trade hit its final target of 27050 for 1210 pt gain and last week's DAX trade completed 390-pt gain. By the time Nasdaq completed its 14% high-to-low decline, it ended up outperforming DOW30 and SPX. Yet, all indices remained below their 55-DMA. Do not waste timeSkip to the 5:00 mins of the clip of the Sep 3rd video (week of Sep top) to hear Ashraf's PRICE & TIME call for DOW30. 

Since the pandemic bottom, the balance of rates vs uncertainty has tilted towards the massive influx of central bank easing. It's led to unprecedented bounces is equities, a major move in gold and never-before-seen lows in interest rates.

By many metrics, it's gone too far. Then again, central banks may have also gone too far. In explaining his FOMC dissent on Monday, Kaplan said the Fed risked inflating a bubble by pledging to keep rates at zero even after its goals are accomplished.

Up until Monday, the dip in technology stocks was largely ignored by the FX and rates market. That changed with equities taking a broader leg down on Monday, led by Europe. What may have changed is that rising COVID case numbers are triggering fears of new restrictions. The US has so far shown a high threshold for COVID-driven economic weakness but other jurisdictions haven't been challenged in the same way. Most likely, the kinds of numbers many US states are tolerating right now would lead to major curbs in the UK or Canada but that remains to be seen.

The balance of it all begs for another look at the charts. Despite some larger moves on Monday, there were few breakouts. Cable held the Sept low, the euro rebounded back into the range from a five-week low and gold finished back above $1900. Here is a recap of Ashraf's calling the top of gold & silver 15 hrs before the peak. 

Note too that markets bottomed in June on the Monday after the FOMC.

In spite of the mountain of worries, the potential for a vaccine and easy policy are powerful tools and it's far too soon to say that balance is broken. Ultimately, it will come down to the charts and the data. On Tuesday we get August existing home sales (exp 6.0m) and the September Richmond Fed (exp +12). 

Soft numbers and other day like Monday would be a strong signal.