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Laurence Balanco , CLSA , says for him, the three big trades for 2025, which could have a shelf life of 8 to 12 months are Bitcoin, the fintech ETF where we can see a breakout trend and the travel tech ETF, which has also recently broken out. These are major breakouts from basing patterns that have developed over the past two-and-a-half years. How much more for the dollar before it peaks out? I understand that money is moving into dollars right now, but nothing lasts permanently.
At 106, 110, 115, where will the dollar find its long-term peak? Laurence Balanco: Yes, it is an important level right now, 106 to 107. It has basically been the top end of the trading range that we have had since the late 2022 lows and if I look at the sentiment now for the dollar index , it is sitting at 83% bulls, that is towards the extended level where we have typically seen the upside momentum stall out at. So, this is a key resistance zone that has capped the upside over the past 18 months.
We would look for some hesitation here at least. But running through the new administration, there are headline risks where some of the appointments could get you a break above that 107, and that is what we are watching quite closely. Obviously, the negative for emerging markets is a stronger dollar.
For all emerging market investors, including fund managing investing in India, a break above 107 would be a further drag on the emerging market investment case. We are looking for it to stall out here with sentiment where it is, but obviously cognizant that there are some headline risks where we could see a break through that 107 area. There has been FPI and FII outflows from the India market and that money has been flowing into China.
I want you to analyse the charts for both Shanghai as well as HSI because all the stimulus measures seem to be falling flat and we are not seeing China markets hold out that well. What is your reading on what the charts are indicating now? Laurence Balanco: It is quite interesting. The first leg down for India we saw in late September, and early October and it was rationalised as the rotation of money into China because they had a big stimulus and policy support through September, October.
But the second leg down that we have had through October into November on that Nifty market has been more earnings issues rather than the China side. The China price action peaked in early October and today we have seen the HSI and HSCI break below their 50-day, which does leave those markets vulnerable for a deeper setback towards their 200-day. So, we actually are seeing weakness, particularly on the HSI, HSCI, the domestic mainland market.
So, we are talking about the CSI300 here. That still sits well above the May highs and well above the 50-day average. So, the domestic sentiment has clearly changed and those equity indices on the mainland have held up much better than what we have seen in Hong Kong which, as we speak, are breaking below the 50-day.
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But going into 2025, a pullback, particularly on the cryptocurrency space, is a buying opportunity. So, any weakness in Bitcoin, taking it back to $74,000, is a buying opportunity. We have got an upside target of $130,000.
So, that is definitely a space we would look at adding exposure to. If we are looking at the sector level, we have seen fresh breakouts in the travel tech space, as well as the global financial services space. So, those are the three spots that I would focus on.
Wrapping out with Bitcoin, the fintech ETF where you can see the breakout trend and then the travel tech ETF, which has also recently broken out. These are major breakouts from basing patterns that have developed over the past two-and-a-half years. What about the commodity construct because that is where a lot of these geopolitical events are weighing heavy, much unlike what is happening with the equity markets? What about crude and more importantly, the meltdown in the metals basket? Do you think the crash in copper is going to sustain? Laurence Balanco: Let us just deal with Brent and oil.
We have been range-bound here for over 18 months. The bottom of the range has been $70-71. The top of the range has basically been at $97.
And right in the middle of that range sits the 200-day moving average, which we recently failed on a rebound in September. So, it is very much range-bound and in the bottom end of that range, with $70 being key support. If we jump over to the commodities, it is quite a mixed bag if you look at where commodity price action sits.
The iron ore side has been quite weak, testing the bottom of the range. But on the copper side, we have corrected. We peaked in May at $5 if you look at the COMEX copper futures.
But it has essentially been range-bound for the past 12 months between $4 and $5. You Might Also Like: ETMarkets Smart Talk: Sunrise sectors to watch - Energy Transition and E-Commerce lead India's investment themes, says Sandip Bansal So, in the near term we can retest the $4. But the evidence that we have on the chart is that that support area at $4 should hold.
The two metals that we most construct out from a chart side, one is aluminium and that has been basing for the past 24 months and we are looking for a move through the 2750 area to confirm that base. Like copper, we have seen a bit of a pullback in aluminium, but the longer-term profile does suggest it is basing out. And the other one is palladium, where we have seen a 75% decline of the 2021 highs.
But over the past 12 months, we have seen an important base develop there, where we think palladium prices can move up between 30% to 40% into 2025, so that is what I would look at within the commodity space. (You can now subscribe to our ETMarkets WhatsApp channel ).
