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Market Brief
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During today’s London open, precious metals and equities rose as the US dollar, the yen, and the Swiss franc declined against higher-yielding currencies. This has been largely driven by good news around the vaccines and studies into Omicron. The US dollar index, however, failed to break through the $96.00 level and the bullish pennant pattern remains intact.
An example of a pennant chart pattern is when an impulsive move in financial securities, known as the flagpole, is followed by a converging trend line consolidation period, and then a breakout in the same direction as the initial large move. As seen in the chart above. Ideally, the breakout to the upside would occur before the converging lines and price meet at the end of the pennant. The measured move from a breakout would take the DXY towards $100.
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The AUDJPY is usually a great barometer of a risk-on or risk-off economic environment and seeing the rising AUDJPY is confirmation that we should expect equities to rise into the end of the week. However, I am always aware that a double bottom is always a potential target for bears to trade towards to grab the stop losses left there by the bulls. 79.00 is a level of a concern, but the higher swing lows and higher swing highs show momentum is to the upside.
Also in the bulls favour is that the majority or retail traders on the ActivTrader platform are bearish the AUDJPY, so these traders are more likely to get squeezed out of their positions first.
Germany’s import prices increased 24.7% year-on-year in November 2021, accelerating from a 21.7% rise in the previous month and exceeding expectations of 22.3%. These costs will have to be passed on to the consumers so a rise in inflation from 5.20% should be expected. This will also hurt manufacturing at some point as prices at the factory gate will rise too high and be rejected.
Elon Musk said on Wednesday that he is nearing his goal of selling 10% of Tesla. “When the 10b pre-programmed sales complete. There are still a few tranches left, but almost done,” Musk said on Twitter in response to an article that said he sold around 10% of his shares. Tesla CEO Elon Musk sold shares in November after posting a poll on Twitter. At the time, Musk vowed to “abide by the results of the poll, whichever way it goes” and noted selling stock would be the “only way” for him to pay taxes personally as he doesn’t take a cash salary or any bonuses.
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The weekly chart of Tesla shows the prior $900 resistance level became solid support and coincides with the nearing of the 10% transfer from Musk to the market. When the sales conclude, Elon will have to pay around $11bln of taxes, which effectively removes those dollars out of the system. Personally, I would rather he could have been able to create a new product or service for the world rather than be the person to have paid the most taxes in one go, in the world, ever.
