Forex & commodities on December 21, 2017: thoughts & outlook

Here are my discretionary thoughts on forex and commodities (oil, gold, silver, etc). I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.


Please read How NAFTA renegotiation will play out and impact the USD

  1. Gold:silver ratio. A bearish sign today.
  2. USDCAD is flashing a bullish sign for the USD Index
  3. Neither bulls nor bears have an edge in gold/silver right now.

4 pm: the case for a trade war has disappeared.
A trade war between the U.S. and Canada/Mexico is unlikely. Trump can yell all he wants, but he cannot start a full scale trade war.
Here’s the latest news out of China: in a bid to restructure its economy, China wants to increase imports and decrease net exports. This is what Trump has wanted all along, and now China wants it too!
*China wants to move away from a manufacturing economy to a consumer-based economy.
As a result, a full-blown trade war between China and the U.S. is unlikely as well.
Based on this update, I no longer think the USD will rally to 96. The USD needs a big new bullish theme if it wants to reach 96.

Neither medium term bulls nor bears have an advantage in forex right now. The best course of action is to wait for a USD breakout or breakdown. The next move will be yuuuuge.
4 pm: The gold:silver ratio sent a bearish signal today.
Silver typically leads gold, which is why the gold:silver ratio is an important indicator.
The gold:silver ratio went up today despite gold going up. A truly bullish trend exists when the gold:silver ratio goes down and gold goes up. This was not the case today.
Here’s gold.

Here’s silver.

6 am: USDCAD is flashing a bullish sign for the USD Index
Many traders consider USDCAD to be a leading indicator for the USD Index. USDCAD and oil often have an inverse correlation (because Canada’s major export is crude oil).
Oil went up and USDCAD went down from June 22 to September 8. This was a normal correlation.
But oil and USDCAD went up together from September 8 – present! This USDCAD price action is bullish. USDCAD is going up despite rising oil prices.

6 am: neither bulls nor bears have an edge in gold/silver right now.
Gold and silver are fluctuating within a shrinking range.
Here’s gold.

Silver’s range has become very narrow. You can expect a big breakout or breakdown in the next few months.

In the meantime, neither bulls nor bears have the upper hand. Going long or short here are both 50-50 bets. Gold and silver have worked off their oversold conditions, so longs don’t have an edge right now.

I think medium term traders should wait for the breakout or breakdown. That is the best course of action.

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