Forex & commodities on December 12, 2017: thoughts & outlook


Here are my discretionary thoughts on forex and commodities (oil, gold, silver, etc). I only trade the S&P 500’s ETFs.

Thoughts

  1. The U.S. dollar’s price action is mildly bullish.
  2. Gold and silver grinding lower = still bearish.
  3. Looking for a divergence in gold and silver before precious metals can bottom.
  4. Where will the Euro, Yen, and Canadian dollar be if the USD Index hits 96?

3 pm: The U.S. dollar’s price action is mildly bullish.
Brady said at 12:25 pm that the Republican House and Senate deals are on track to reach a tax bill deal by this Friday. Both the USD and S&P 500 tried to sell this news, but the markets instantly bounced back. The “buy the dip” price action is still there.


As you can see, the S&P’s “buy the dip” mentality is much stronger than that of USD’s. So even though I think the USD will go up after the Republican tax bill is passed, I don’t think it will go up to e.g. 100. Its price action is too weak.
3 pm: Gold & silver grinding lower = still bearish
Gold and silver continue to grind lower.


This is the worst kind of price action. Grinding lower usually ends with a mini-crash (e.g. silver falls 5% in one day, gold falls 3%) with a big upwards spike in the gold:silver ratio.
There is one small bullish price action right now. While gold continues to make new lows, silver hasn’t made new lows over the past 3 days. (Silver typically leads gold).
5 am: Momentum divergence in gold and silver
I think gold and silver should make a momentum divergence before they can make a medium term bottom. Silver is starting to make his divergence, but gold has not made a divergence yet.


5 am: Targets for currency pairs.
I think the USD Index will bounce to 96 if the Republicans pass their tax cut. What is this equivalent to for various currency pairs?
It’s around $1.15 for the EURUSD. This is a big prior resistance and also approximately the 200 weekly moving average.

It’s around 115 for USDJPY. This is higher than 114.5, which has been a big resistance for USDJPY this year.

96 on the USD Index is also approximately $1.307 for USDCAD. This is USDCAD’s 38.2% retracement of its entire decline.

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