Poor China data starts easing rumours and a rotation into risk on. Bullish technical set-up on Platinum.
Neither of my two favourite precious metals has had a great day in Asia today. Platinum is off 2.60% on the day. Palladium is unwinding all of its Wednesday rallies in unceremonious fashion, plunging 4.35%. I shall have to go away and think more on the latter…
Like Wednesday there appears to be no one single factor driving the moves. Liquidity as ever plays its part in Asia. Japan has also returned from vacation today, and it may be more than just co-coincidence that both rallied on Wednesday in Asia only to be sold hard in Asia today.
A “risk on” buoyant stock market today and a very perky oil rally are continuing into the Asia session. I certainly have my doubts as to oils bullish longevity much as I did the New Zealand Dollars ability to sustain a meaningful sell-off in a zero percent world. (see previous articles)
The main reason I suspect is the very disappointing data from China today. Both Industrial Production and Retail Sales came out about as expected.
– (CN) CHINA JULY INDUSTRIAL PRODUCTION M/M: 0.5% V 0.5% PRIOR; Y/Y: 6.0% V 6.2%E; YTD Y/Y: 6.0% V 6.0%E
– (CN) CHINA JULY RETAIL SALES M/M: 0.8% V 0.9% PRIOR ; Y/Y: 10.2% V 10.3%E; YTD Y/Y: 10.3% V 10.3%E
Source: Trade the News
It is not the “as expected” bit that has the market nervous. The Street was looking for more positive numbers to offset a growing worry that China’s slowdown is accelerating, and its 6.5% GDP target is in doubt. We all love a good rumour on a Friday, and the market obliged with lots of talk circulating that China may introduce Quantitative Easing, etc etc etc to keep the lights on economically.
This has seen a pivot short term into “risk on” trading and out of “risk off”, with carry trades such as NZDJPY, AUDJPY, even USDJPY all higher on the day. Stock Indices and Oil and Copper have all had positive days as well, as Asia holds out for a sugar rush from China. As a result, Gold, Silver, Platinum and Palladium are all in the red to varying degrees.
Stepping out of the noise of the day though Platinum continues to show a very interesting and potentially very bullish set up technically on the daily and the weekly charts. It appears to be consolidating a very big Inverse Head and Shoulders formation which, if correct, points to a substantial rally ahead.
The neckline for Platinum comes in at 1115 area, and this is now daily and weekly support. A daily and weekly and a consolidating break below invalidating the formation.
As I have said before, there is typically a consolidation period above the neckline after a break. Platinum has been doing this for the last two weeks very nicely. As shown on the chart the distance from the head to the neckline is $ 305.60. Therefore from a technical perspective Platinum should soon start climbing its merry way to a target of 1415.60. (1110 being the break)Head and Shoulder pattern points to new highs ahead.
About Jeffrey Halley
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia. Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.