HYCM Market Insights & Trading Tips

Market Mood Platinum 10.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Listen to the latest market mood for Platinum on Youtube.



Platinum is approaching its best time of the year due to the seasonal trend of the metal gaining from mid-December and over the first couple of months of the following year. This is a pattern that has stood over the last 25-30 years. Platinum is a market where, according to the World Platinum Investment council, demand is expected to outstrip supply for the end of this year and throughout 2021. Furthermore, there is a strategic role for platinum in the growth of the hydrogen economy too, so demand could expand even further. Is this a great time to go long?

Therefore, expect Platinum buyers as long as price remains above the key trend line on the daily chart.

Trade Risks:

1. The main risk to this trade is a strong USD. This will send Platinum lower.
2. If we see falling platinum demand that will invalidate this outlook.
3. If price falls below the key daily trend line.

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Why markets are well into a cyclical recovery
by Giles Coghlan, Chief Currency Analyst, HYCM

The recent surge in stocks during November show a world that is poised for a strong recovery. A current question is whether that surge can keep pushing higher. Typically this time of year is very strong for stocks and a ‘Santa Rally’ is a well known seasonal phenomenon. Stocks rise in December as general rule of thumb. Furthermore, as long as the US stimulus bill is being anticipated that should keep stocks supported in the near term. However, the US stimulus bill aside, here are some key indicators from a Bloomberg Opinion piece on why the globe is now in a cyclical recovery.

Key indicators a global recovery is underway

1. South Korean and Taiwanese stocks lead the surge higher
These two industrial exporters of North Asia benefit from being in China’s slipstream. They are both strongly higher.


2. Industrial metals are soaring
Iron ore is up around 50% on the year and Copper is at a 7 year high having gained around 30%.


3. Transport stocks
Another bellwether for global growth, Transport stocks have overtaken the market in their steady grind higher



Where will the market go next?
This is where things become more unclear as no-one has a crystal ball. However, some key themes to watch are:

1. How much have future stock returns been borrowed this year from all the central bank intervention? Can the surge higher in stocks continue and if so for how long?
2. Are risk assets too expensive? When is a correction due?
3. Large amounts of money supply should result in inflation. Look at the large amounts of money supply added into the US on the chart below. The last time that money supply was increased this much (around 1944 on the chart) inflation surged to over 15% in the US.

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Seasonal Insights: Gold 11.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Can we expect gold buyers from December 16 and beyond? Listen on Youtube.


Gold is starting to now enter its strong time of the year. From December 16 through to February 24 gold has risen eight times out of the last 10 years. The largest gain was in 2015 with a +16.23% profit. The largest loss was in 2012 with a -6.46% loss. The annualised rate of return is +39.73% for this period. So, with an 80% win rate this could be a great time at the end of next week to start buying gold. Mark it in your diary.

Trade Risks:

1. The main risk to this trade is if there a lack of perceived action by the Federal Reserve at their next rate meeting on December 16.
2. Dollar strength will also invalidate this outlook.

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Week Ahead 14.11.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Equities started following November’s gains this week as vaccine optimism and US stimulus hopes continued to boost risk assets. Upticks in stocks, commodities, and pro-cyclical growth currencies like the AUD and the NZD all kept moving higher at the start of the week on the positive sentiment. Some nations also started to see the roll out of their first COVID-19 vaccines. However, be aware that it is not yet known if a vaccinated individual can still pass on the virus. So, it may not be until summer next year that life starts to feel normal again without the risk of lockdowns. However, risk assets have been rising on anticipation of a ‘normal’ 2021 and dips are being bought. Will that continue?

Other key events from the past week

1. US stocks climb: All time highs, December 08. US stocks markets made all time highs in the Dow Jones, Nasdaq and S&P500 midweek on anticipation of a US stimulus bill. How far can these gains continue before a deeper pullback?
2. GBP: Brexit headlines, December 09. The GBP was pushed and pulled all week on Brexit headlines. If there is a no deal Brexit expect heavy selling in the GBP as investors have been buying the GBP since June expecting a deal.
3. ECB: Interest rate decision, December 10. Rates were kept unchanged. PEPP purchases were increased by €500 billion and extended through to March 2022. (The extension was a surprise as until the end of 2021 was expected). There was no other surprises in the statement.

Key events for the coming week

1. USD: Interest rate decision, December 16. The Federal Reserve meets for the final time in 2020 and analysts expect some kind of further easing. However, will it be enough to please markets or will it disappoint and send US stocks lower?
2. EUR: Flash PMI’s, December 16. Flash PMI’s next week will indicate how recent European lockdowns have impacted European sentiment. Will vaccine optimism support European PMI’s or will they turn and weaken the euro?
3. S&P500: Santa rally ahead? December 14. Over the last 70 years the S&P500 has gained between December 15 and 31. It has risen in 55 years out of those 70 years. The largest gain was a huge +8.49%. Will vaccine optimism this year help investors to repeat the seasonal pattern?

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What did we learn from the latest Bank of Canada decision?
by Giles Coghlan, Chief Currency Analyst, HYCM

In the latest Bank of Canada statement they kept interest rates unchanged at 0.25% and their QE program unaltered too at $4 billion per week. The Bank of Canada recognised that the recovery was well underway and will adjust its QE purchases as required to help bring inflation back on target.

Future projections

In terms of future projections the Bank of Canada is following the Federal Reserve and the Reserve Bank of Australia with no interest rates hikes seen until 2023.
The Bank of Canada recognised that economic momentum heading into the fourth quarter appears to be stronger than was expected in October but, in recent weeks, record high cases of COVID-19 in many parts of Canada are forcing re-impositions of restrictions. The Bank of Canada is expecting that to drag growth lower for the first quarter of 2021. The Bank of Canada is expecting a delay in the recovery as the vaccine takes time to roll out. All in all it was a holding statement.
You can read the full statement here.

USDCAD reaction

There was very little in terms of surprises from the Bank of Canada decision and USDCAD moved very little on the announcement. There is no clear directional bias for a trade from the decision. In the near term the main driver of the USDCAD will be the prices of oil and the path of the USD. A strong USD = USDCAD strength. Weaker oil prices= USDCAD strength and vice versa.


The next monetary policy meeting is January 20, 2021.

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Seasonal Insights: Siemens Aktiengesellschaft 14.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM


Can we expect Siemens Aktiengesellschaft buyers from December 12 and beyond? Listen on Youtube.



Siemens Aktiengesellschaft is a German multinational company headquartered in Munich. It is the largest manufacturing company in Europe. Over the course of the last 14 years it has gained 12 times between December 12 and December 31. The average return has been +3.19% and the maximum profit was in 2008 with a whopping +17.14%. The largest loss was -1.59% in 2017. Will the large amounts of stimulus promised by the ECB help support Siemens share prices this year? Or will markets buck the seasonal trend and head lower?

Trade Risks: The main risk to this trade is if there is strong risk off trading heading into year end.

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Is Platinum approaching the time to buy?
by Giles Coghlan, Chief Currency Analyst, HYCM

Platinum has been looking very strong from the end of November when it has become increasingly clear that demand is expected to outstrip supply this year and next. See a recent article on that here.



Now, on top of this physical demand, seasonal demand picks up at this time of year for Platinum. If we take a look at the last 25 years of price movement in Platinum between December 16 and Jan 31 we notice the following key points:

1. Price has finished higher 19 times out of those 25 years.
2. The average gain in price has been +5.14%.
3. The maximum profit has been +15.55%.
4. The largest loss was -4.76% in 1996.
5. The maximum drop was -6.48% in 2015, but the drop recovered to a -0.67% loss.
6. The maximum rise was in December 2008 with an 18.36% rise. That year turned into a 15.26% gain.
7. The annualised return of that time period (if the average return was calculated for a year) would be 48.95%.

So, we have the fundamentals aligning. In terms of the technicals – stay above the trend line market on the chart below and buyers are in control. This trend line can be used to define and limit risk in the near term. If price break though it to the downside then longs can be taken off. If price then breaks back above longs can rejoin. The market is flowing quite freely, so we should continue to see clean moves. The only risk with this approach is if ranges narrow and price starts going above and below the line multiple times. In that case you could allow for a 2% break of the line either way as your trigger.

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Seasonal Insights: Dax 15.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Can we expect DAX buyers into year end? Listen on Youtube.



The DAX tends to gain in the last half of December. Over the last 32 years the DAX has gained a total of 23 times between December 15 and January 01. The largest gain was in 1998 with a 15.77% profit. The largest loss was -8.83% in 1990.

Trade Risks:

1. The main risk to this trade is if there is strong risk off trading heading into year end on the US stimulus bill not being passed.
2. Another key risk is a large rise in European Covid 19 cases which could result in longer European shut downs and push the Dax lower.

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Gold’s time to shine?
by Giles Coghlan, Chief Currency Analyst, HYCM

Gold is now entering its very strong time of year. When you take a look at gold from the dates of December 24 through to February 19 over the last 25 years you can observe that gold has risen during that time for a a total of 18 times.



Good returns

The average return has been +3.96% in profit. The maximum profit has been a whopping 14.43%. The largest loss has been a fall of -6.57 and that was during the year 1996. So, from a seasonal perspective gold is attractive. The reasons for the strong seasonality are not coincidences. Rather they are based on strong physical demand factors. China is the largest buyer of gold in front of India. In the Lunar New year there is a tradition of buying gold gifts. These gold purchases are what drives up gold prices year in year around the turn of the year.

Tonight the Fed will meet for the last time this year. If we see a dovish twist here that could well be the catalyst that gold needs to launch into a strong gain for early 2021. The Fed is limited in what it can do as financial conditions are already loose with very low interest rates. However, the Fed has the following key options it can implement to create easier conditions:

1. Lengthen the maturities of the bonds.
2. Expand total purchases from $120 billion a month.
3. List the outcomes it wants to achieve before winding the program back.

If we see the Fed making a move here watch out for gold buyers to step in and try to hold gold longs through January.

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Market Mood Platinum 16.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Listen to the latest market mood for Platinum on Youtube.


Gold is about to approach a very strong time of year in terms of seasonal demand. The Chinese Lunar New Year drives up demand for gold as traditionally gifts of gold are given over this period which drives up the physical demand. However, platinum may offer a better buy ahead of the Fed’s meeting. If the Federal Reserve are bearish and add some kind of easing bias into the meeting then the USD will weaken. That supports commodities higher. Furthermore, any positive vaccine news will also support platinum due to it being an industrial metal. With Platinum rising higher on vaccine hopes and a bearish Fed the stage could be set for some strong gains over the next few weeks. One to watch!

Therefore, expect Platinum buyers.

Trade Risks: The main risk to this trade is a strong USD if the FED are more optimistic than the market was expecting.

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8 financial hiccups that could be ahead for 2021
by Giles Coghlan, Chief Currency Analyst, HYCM

StanChart see eight big risks ahead for 2021 . It is well worth being aware of these risks as we head into 2021. Here are the 8 underpriced risks that may be ahead:

1. Democrat’s win Georgia’s seats to take the US Senate

1. Democrat’s start a legislative agenda to raise taxes and change tech regulation.
2. Impact: Tech stocks fall and US Treasury yields surge on supply fears. In this scenario watch for a fall in the Nasdaq and key tech stock.

2. US and China find common ground

1. China allows its currency to gain in effort to lift purchasing power for companies and consumers.
2. Impact: USD/CNY falls to 6.00. The USDCNY pair has been falling hard on a Biden Presidency. This scenario will only accelerate these falls.

3. Monetary and Fiscal stimulus drives strongest recovery in a century

1. Eager to capture gains in real assets investors and traders shift increasing amounts to markets like copper.
2. Impact: Copper rallies 50%.

4. OPEC splinters

1. In order to plug fiscal finances, oil exporters abandon supply quota and OPEC co-operation collapses.
2. Impact: Oil to $20 a barrel.

5. European fiscal hopes dashed

1. ECB’s ability to support the recovery is called into question with zero policy rates and 100% GDP balance sheet.
2. Impact: EURUSD falls to 1.06.

6. US Treasury Secretary abandons strong dollar policy

1. Congress fails to agree a fiscal package and Janet Yellen talks down the dollar.
2. Impact: dollar down 15%. At the time of writing this outlook seems highly unlikely as a US stimulus bill is said to be ‘close.

7. Emerging market debt defaults

1. Corporate debt defaults and then state sponsored entities lead to ratings downgrades.
2. Impact : Emerging Market equities fall by 30% in worst year for EM since 2013.

8. US President Biden steps down

1. Frustrated at the failure to bridge gap between Republicans and Democrats Biden resigns in favour of Kamala Harris.
2. Impact: Sharp correction in U.S equities lower.

So, there we have it. Eight underpriced risks for 2021.

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Week Ahead 21.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

It was the week of deals. First it was the Brexit deal that was ‘nearly there’. Then it was the US stimulus bill that was ‘close’ to being finished. There is an obvious rush to get these two hurdles out of the way before year end, but at the time of writing neither deal is agreed. The most anticipated event of the week was the Federal Reserve’s final rate statement of the year. Market participants were widely expecting a dovish shift from the Fed. The Federal Reserve were not as explicitly dovish as they could have been, but nevertheless they said that reducing bond purchases is some way off and the Fed would continue to provide powerful support.

Other key events from the past week

1. EUR: Flash PMI’s, December 16. Improved flash PMI’s boosted the EURUSD on Wednesday. However, with German and the Netherlands starting harsher lockdowns this week will the euro relief only be temporary?
2. GBP: Brexit headlines, December 09. The GBP was once again pushed and pulled all week on Brexit headlines. The main risk still remains a no deal Brexit. Expect heavy selling in the GBP as investors have been buying the GBP since June expecting a deal.
3. USD: Interest rate decision, December 16. Rates were kept unchanged as expected and the Fed said that it will continue bond buys ‘until substantial further progress has been made toward the Committee’s maximum employment and price stability goals’.

Key events for the coming week

1. GBP: Brexit headlines, December 21. The GBP will remain vulnerable next week to Brexit headlines. As investment desks take a break, watch out for possible volatility in the event of a no-deal Brexit between now and year end.
2. Gold: ETF selling slows, December 22. Recent falls in XAUUSD have been enhanced by ETF outflows. The selling slowed last week. Could this be the turning point for gold ahead of strong demand for the Chinese Lunar New Year?
3. S&P500: Santa rally ahead? December 21. Over the last 70 years the S&P500 has gained between December 21 and Jan 01. It has risen in 47 years out of those 70 years. The largest gain was 6.90%. Will the seasonal pattern repeat this year?

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Market Mood AUDJPY 17.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Listen to the latest market mood for the AUDJPY pair on Youtube.


Strong AUD, Weak JPY

The AUDJPY pair is set to gain from a COVID-19 vaccine. The AUDJPY pair is often traded as a proxy for global growth. With vaccine hopes well underway, large levels of fiscal and monetary support, rising commodity prices and optimism for a return to growth in 2021 the AUDJPY pair stands to gain from current prices.
The daily chart has shown a break of a head and shoulders pattern on the daily chart and a measured target of 82.00 would be the first target for buyers. Stops would be run underneath the right shoulder at 75.00.

Therefore expect AUDJPY buyers at market.

Trade Risks:

1. The main risk to this trade is if global growth does not happen next year.
2. Another risk is if the US stimulus bill is not passed and equity markets fall. This would invalidate this outlook.

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What did we learn from the Federal Reserve this week?
by Giles Coghlan, Chief Currency Analyst, HYCM

The Federal Reserve meeting was fairly uneventful when all things were considered. Rates were unchanged, but that was not expected to show any change. There was no sense of the anticipated ‘twist’ in the decision. Bond maturities were not lengthened. Asset purchases were not expanded from their current level of $120 billion a month and the guidance for future QE was suitably vague. The bond purchase would remain in place until it see’s ‘substantial further progress’. What is ‘substantial’? Hard to say.

But I guess that is the point. The best explanation of the decision that I read was from Ye Xie a Bloomberg reporter who said that the Fed didn’t want to box itself in. He summarised it as the, ‘I know it when I see it’ approach. That is a good explanation. Who would want to be boxed in by tieing the tapering of bind purchases to specific numbers. There lies the way of error and absurdity. There is enough guidance in place and plenty of support.

That was the view the market took in the end and merrily bought into risk assets. BTCUSD grew wings, gold and silver steadily bid, Dollar fell and equity futures ground higher. Santa rally time. It is strange why the market listened to Powell’s ‘ultra-dovish stance’ at this rate meeting, but pretty much ignored it in the last meeting. However, the price action was pretty clear and that flagged the way higher for gold in a clear Harami inside bar fans break. Going long gold was the obvious play out of the meeting, despite no ‘twist’ from the FOMC.


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Seasonal Insights: DXY 18.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Can we expect Dollar Index sellers into year end? Listen on Youtube.



A bearish FOMC has caused the Dollar Index to sell off. However, there are also very important seasonal factors at work in the Dollar as we approach year end. The Dollar is sold partly due to taxation issues. At year end US companies send USD out of parent companies to daughter companies. This results in USD outflows.

Over the last 50 years, between December 22 and Jan 01 the Dollar Index has lost value 36 times. The largest loss was -3.10% in 1977. Will there be losses again this year? If so, expect sellers on the rallies.

Trade Risks: The main risk to this trade is if there is strong risk off trading heading into year end on the US stimulus bill not being passed. This should result in USD strength on risk off flows.

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Seasonal Insights: DAX 21.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Can we expect DAX buyers into year end?

Attached Image (click to enlarge)

The Dax tends to gain in the last half of December. Over the last 32 years the DAX has gained a total of 22 times between December 21 and January 01. The largest gain was in 1998 with a 15.77% profit. The largest loss was -4.35% in 1990.

Trade Risks:

1. The main risk to this trade is if there is strong risk off trading heading into year end on the US stimulus bill not being passed
2. Another key risk is a large rise in European Covid-19 cases which could result in longer European shut downs and push the Dax lower.

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Seasonal Insights: Gold 23.12.20
by Giles Coghlan, Chief Currency Analyst, HYCM

Gold in focus! Is this the perfect time to buy gold?



Gold tends to rise at this time of year due to strong demand from China for the Chinese Lunar New Year. Over the last 32 years gold has risen 21 times between December 23 and February 17. The average gain has been +2.85%. The largest gain was in the QE world of 2008 with a whopping +14.76% profit. With the Fed committing to ultra loose easy monetary policy is this the best time to buy gold now?

Trade Risks:

1. The main risk to this trade is if there is strong risk off trading heading into year end on the US stimulus bill not being passed.
2. Another key risk is a large increase in gold ETF selling. It has steadied recently, but an acceleration in selling could drag gold prices lower.
3. A cancellation of the Chinese Lunar New Year holiday.

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Is the UK FTSE 100 in a good place to buy?
by Giles Coghlan, Chief Currency Analyst, HYCM

One potential reaction from a Brexit deal was a ‘buy the rumour sell the fact response’. This would be where the GBP was sold off despite the good news of a deal. This response often happens when a deal or economic outcome is expected for some time in advance as was the case for Brexit.

However, this did not happen with the GBP on the Brexit deal. This is revealing. It means that the narrative to the case for investors waiting on the sidelines for a post Brexit deal makes sense. Investors have been waiting for Brexit to be finally agreed before releasing investment into the UK.

If this is indeed the case then the UK’s FTSE 100 could potentially stand to benefit considerably over the course of 2021. Prior to the Brexit deal the UK struggled to attract investment in comparison with other European bourses due to the uncertainty. That uncertainty has now passed. The UK is currently struggling with a resurgence of COVID-19 and the new variant which has caused the UK to fall into another lock down. However, the FTSE 100 could stand to gain in value over the year.

Technicals

One way to enter is on a break of the weekly ascending trend line below. It is a higher time frame and the entry and exit would be simple. Stay above the trend line, stay in. Fall below the trend line, get out. Profit could be taken at previous highs. The other option would be to hold the trade into April before the seasonally weak summer.



Key Risks

1. The vaccine rollout goes wrong.
2. COVID-19 proves resistant to vaccine.
3. The UK economy hit by some as yet unknown factor.

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Week Ahead 11.01.21
by Giles Coghlan, Chief Currency Analyst, HYCM

It was all about the Georgia run offs this week as the markets began to price in a Democratic sweep for the US. With the Democrats able to control the Senate it means that Biden’s policies will have a much easier path through the US administration. Although tech stocks took a wobble on a prospect of a democratic win the majority of global stocks rallied higher. Why? The worries about higher rates, stricter regulation, and higher taxes have been blown away on the expectations of higher spending. Expect Democrats to now focus on passing large amounts of stimulus which should be a further tailwind for US stocks.

Other key events from the past week

1. USD: Manufacturing PMI’s, Jan 05. December’s manufacturing came in strongly at 60.7 vs 56.7 expected. It was a great report showing strong underlying demand for products and high levels of Q4 US production.
2. FTSE 100: Brexit relief, Jan 06. The FTSE 100 broke out of a key weekly trend line at 6637 on relief that Brexit is finally over for the UK. Will the FTSE 100 reach 7600 before April this year or will COVID-19 shutdowns hamper UK growth?
3. US Oil: OPEC+ Meeting, Jan 05. Russia and Kazakhstan raised output by a total of 75K bpd in February and another 75K in March. However, Saudi Arabia surprised oil markets by announcing a voluntary 1mln bpd cut.

Key events for the coming week

1. USD: Retail sales, Jan 15. The US consumer makes up around 70% of the US’s GDP. Any pick up in retail sales from the last month’s reading of -0.9% will sup-port the US economy and show consumer strength.
2. Gold: ETF buying resumes, Jan 11. XAUUSD fell midweek on the rising US 10 yields but medium term USD weakness should support gold as ETF buying is in-creasing again after November’s drop. Will $1900 prove to be key support for gold?
3. S&P500: Stimulus rally ahead? Jan 12. Will the S&P500 rally higher next week on continued hopes of further stimulus from a Democratic blue sweep? The market is hearing the win as, ‘Spend, spend, spend’.

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Is gold set to run higher?
by Giles Coghlan, Chief Currency Analyst, HYCM

The recent run higher in gold looks set to continue based on the following reasons.

1. There are some very strong seasonals in play with the Chinese Lunar New Year approaching. See chart below.



Gold tends to do very well at the start of the year and this point is being confirmed by the rise in ETF flows that are coming in at the start of the year.

2. Gold ETF flows start to rise again after bottoming out.



The holdings in SPDR gold shares, which is the largest bullion backed ETF, grew by 17.2 tons on the first day of this week. That is the biggest amount of inflow since September. The last run higher in gold was driven by these rising ETF levels. This was despite the drop off in physical demand due to COVID-19. So, this means that gold looks set for higher prices based on the rising ETF flows. The ETF flows tend to trend and they also tend to move in tandem with gold prices. Rising ETF flows generally equates to rising gold prices and vice versa.

3. The FOMC minutes show a unified board that is set to approve more easing.

4. Low US rates, high levels of QE, fiscal stimulus via a ‘blue sweep’, and fiat currency debasement all favour higher gold prices.

The timing is an issue here, but the $1900 level looks a key area to define risk. Stay above and buyers are in control. Fall below and seller retake the near term control. It is a good place to define risk.

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