The financial market started 2016 in a huge surprise leading from the Chinese market and oil breaking below the $30 level. With all these events happening, we decided to share with you more in depth into the fundamental aspects of trading as well.
OVERALL FUNDAMENTAL ASPECT
VIX is currently still above the 20 level. As long as the index remains above 20, risk appetite is expected to continue to be low, favouring a risk off sentiment. Funding currencies such as EUR will see some strengthen together with safe haven currencies such as JPY and CHF.
Looking at the US market, we do see a huge drop from the ripple effect of the Chinese market last week as well. The index is currently trading in the Demand Zone. We do expect some bounces and retracement to the upside from here. Immediate resistance levels are 1993.50 and 2019.50. A break below the Demand Zone and we will see more downside to the S&P500.
Similarly in the Europe, the German DAX saw a drop as well. The index is currently headed towards the Demand Zone with resistance at 10116 and 10852.
For WTI, price is clearly still in a bearish trend, breaking new lows. Immediate resistance is at 34.25 with the Supply Zone just above around the 38 level. As long as price remains below the Supply Zone, our bias is still to the downside.
With the market risk increasing, gold prices have been affected as well. The immediate support is at 1078, with the immediate resistance at 1109. As long as price remains above the Demand Zone, we are expecting price to move higher. Traders who are trading the commodities market can potentially look for a long opportunity near the support level which confluence with the 50% fibonacci retracement level.
The Dollar index is currently bouncing and respecting the rising channel. The immediate resistance is at 99.40, with immediate support at 97.80. We will need a strong break above the Supply Zone to have strong confirmation that the US Dollar is indeed bullish. On the other hand, a break below the 97.20 level would potentially see more downside to the US Dollar.
WHAT THESE MEAN TO US AND YOU
While we do not specifically trade these indexes, we utilise these information to give us an indication to the market risk appetite and how this will also affect the currency market. As long as the sentiment remains, our bias remains as follows:
- AUD & NZD bearish (mainly due to the Chinese market and risk sentiment)
- CAD bearish (mainly due to the Oil prices)
- EUR bearish (fundamental of EUR is still weak)
- CHF & JPY bullish (while both currencies are fundamentally towards the weaker side, these currencies tend to strengthen during risk off market environment)
- GBP bearish (fundamental data on GBP has been weak)
- USD neutral (while the FED has hike rate, there are still uncertainties in the US economy. NFP last week was strong, but the average hourly earnings fall short of expectation)