Platinum to go higher?

Please attribute the following commentary to Jeffrey Halley, senior market analyst at OANDA Asia Pacific

Platinum to go higher?

• Poor China data starts easing rumours and a rotation into risk on
• Bullish technical set-up on Platinum

Neither platinum nor palladium had a great day in Asia today. Platinum is off 2.60% on the day. Palladium is unwinding all of itsWednesday rallies in unceremonious fashion, plunging 4.35%.

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 buoyant, “risk on” stock market today along with a very perky oil rally continued well into the Asia session.

While I doubt oil’s bullish longevity as much as I did the New Zealand Dollar’s ability to sustain a meaningful sell-off in a zero percent world, the main reason I suspect there is buoyancy is the very disappointing data out from China today. Both the Industrial Production and Retail Sales figures 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%ESource: Trade the News

So, 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 that 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, to ‘keep the lights on’ economically speaking.

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.

Platinum

Outside of the noise today, Platinum shows 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 around 1115 and this now daily and weekly support. A daily and weekly and a consolidating break below invalidating the formation.

Typically, there is 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 below, 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.

Graph: Head and Shoulder pattern points to new highs ahead – Jeffrey Halley, senior market analyst at OANDA Asia Pacific

About Jeffrey Halley

Based in Singapore, Jeffrey has over 25 years of experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand yet he has spent most of his career based 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.

For direct comment, please contact:

Jeffrey Halley

Senior Market Analyst

OANDA Asia Pacific

jhalley@OANDA.com+65 6579 8288 ext 212121

+65 9457 1849