Tuesday, June 21, 2011

Intermarket Analysis

Oil
Oil has been breached of it's key supports, and remains below the 100 line.
Oil 4 month Lows

USD
The US dollar has shown signs of strength, and despite the continuing eco data pointing towards weakness, the risk aversion trades are taking hold across the markets and the commodity prices are likely to face headwinds.
Dollar Bear Market Ending

Gold
The gold may start decoupling from other commoditiesif it maintains it's inflation and sovereign price premium.
I have tried to trade the gold equity miners in the past months without much success, and it seems that the commodity is outperforming the equities by a fair margin. Not sure what this implies, yet.
Miners tanking

China
China is completely lagging any market recoveries, and the rising of interest rates with ticking CPI may be too hard to overcome in the coming year to create any asset price momentum.

EUR
The political games being played within the currency are causing volatility within the currency. On the greek government front you have the Greece uprising against proposed austerity measures, on the euro board we have Germany who doesn't want to bear the risk of another countries economic malaise, and today we realised that Moody has interpreted the debt rollovers as sign of default. Moody's statement saw a short sell-off, but it has abated.
Germany seethes

AUD
The RBA meeting saw some dovish comments, based on inflation concerns, but nothing revealing beyond Stephens comments last week. Based on the technicals, I expect range bound to distribution selling of the AUD, and a break of 1.44 will see an easy test of 1.02. This would be my favourite short if it wasn't for the carry interest that makes me trade around it, as opposed to just flat holding it to target.
Dovish tone on rates