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The volatility index is rallying strongly

Four key markets in focus today.

Volatility Index (November 13)

The volatility index has rallied strongly over the last week or so as traders buy put options to hedge physical equity holdings. This is limiting the downside seen in stocks. The November contract closed at 19.08, which is a sharp rise from 15.68 seen in mid-September. Technically the daily MACD is still below zero; however the five-, ten- and twenty-day moving averages are all headed higher and in alignment, suggesting higher levels. The chance of a technical default in the US is low, but it can’t be ruled out and this is pushing up volatility.

GBP/USD

My bias has shifted in cable to one of selling rallies, with 1.6150 a good entry point in my opinion. Data in the UK should continue to be strong over the next month or so, however the buying momentum has run out of steam. At 19:30 we get to see the latest UK industrial (expected to decline 0.7% year-on-year) and manufacturing production; good numbers here could push the pair closer to levels I am happy to sell at.

USD/CAD

USD/CAD is a low beta way of expressing concern around the debt ceiling. USD/CAD looks bullish on the four hour chart, having broken out above the 1.0356 high and the MACD pushing above zero. Stochastics are nearing extreme levels, so the upside may be limited, but traders should be looking to buy dips given the positive price action.

Spot gold

I’ve been looking at short positions on spot gold recently and continue to feel gold is due to fall below $1300 and lower over the coming months. Traders could look to short gold at current levels, placing potential stops at $1344, just above the August downtrend and 38.2% retracement of the recent falls from $1433 to $1277. The daily MACD is also convincingly below zero. Of course a risk to this is a real belief that the US will default, in which case gold could rally up to $1400.

Follow these markets on our trading platform

Our Trader Radar watchlist will be updated each morning to give you quick access to important markets. To find the watchlist:

  1. Log in to the trading platform.
  2. In the Watchlist panel, select Trader Radar from the drop-down menu. If this panel is not visible, click the Watchlist button (at the top).
  3. Alternatively, select Trader Radar from the Watchlist section (near the bottom left hand corner) in the Finder panel.

    Follow these markets on our trading platform

    Our Trader Radar watchlist will be updated each morning to give you quick access to important markets. To find the watchlist:

  4. Log in to the trading platform.
  5. In the Watchlist panel, select Trader Radar from the drop-down menu. If this panel is not visible, click the Watchlist button (at the top).
  6. Alternatively, select Trader Radar from the Watchlist section (near the bottom left hand corner) in the Finder panel.

 

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