Markets to watch this week
What to watch for Spot Silver, China A50, and USD/CHF.
USD/CHF: Room for a near-term bounce?
The USD/CHF has retraced more than 8% since May this year, but recent price movement has shown some signs of stabilisation. A consolidation since late-August has been met with an upward breakout, while its daily relative strength index (RSI) has also reverted above its mid-line for the first time since July this year. If the recent trend of upside US economic surprises continues, looking at the non-farm payrolls and inflation data, aggressive rate cut expectations for the Federal Reserve (Fed) may face further pushback, with the likelihood of a rate hold potentially being brought back on the table. The US economic surprise index has reverted into positive territory for the first time since April this year.
The projection of the consolidation breakout may leave the 0.8730 level as a potential price target, where a resistance confluence may stand (100-day moving average (MA), daily Ichimoku Cloud). On the downside, the previous upper consolidation range at the 0.8546 level will not serve as a resistance-turned-support to watch in the near term.
Levels:
R2: 0.8833
R1: 0.8730
S1: 0.8546
S2: 0.8365
USD/CHF chart:
Spot Silver: Can prices retest its year-to-date high once more?
A stronger US dollar and a surge in Treasury yields have seen silver prices struggle to cross its year-to-date high at the US$32.45 level despite multiple retests since September this year. That said, we see prices being supported at a trendline support near-term, while its daily RSI attempts to hang above its mid-line. Bullish catalysts to watch ahead may revolve around safe-haven buying on geopolitical risks ahead, along with stronger industrial demand with China’s recent stimulus efforts.
A further upmove to retest the US$32.45 level may raise the odds of an upward break to a fresh year-to-date high. On the downside, the trendline support at the US$29.95 level will remain a crucial support to hold.
Levels:
R2: 32.45
R1: 31.60
S1: 29.95
S2: 28.41
Spot Silver chart:
China A50: Sell-off cools, with room to stabilise near-term
The unwinding in the China A50 has taken a pause lately, despite some disappointment over the weekend as Chinese authorities once again failed to give specifics around the scale of fiscal stimulus. We believe more clarity around fiscal policies will only come after the US elections, as the next US president will determine upcoming trade relations and hence, support for targeted areas in US’ crosshair. Until then, we may expect some caution to persist as risk-taking stands limited.
Technically, prices are locked in a near-term consolidation. Greater conviction for buyers taking control may have to come from a break above the 14,000 level. On the downside, a break below the 13,600 level may suggest continued weakness in the index, which may leave the 13,078 level on watch as a crucial 61.8% Fibonacci retracement support to hold.
Levels:
R2: 14,660
R1: 14,000
S1: 13,600
S2: 13,078
China A50 chart:
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