Forex & commodities on February 1, 2018: outlook


Here are my discretionary thoughts on forex and commodities. I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. Gold’s upcoming correction completely depends on the U.S. dollar.
  2. USDCNY is leading oil, gold, and silver.
  3. Oil’s seasonality is weak in February and strong in March-April.

4 pm: gold’s upcoming correction completly depends on the USD.
Gold is extended in its intermediate cycle (TIME). Gold should make a pullback/correction right now from a TIME perspective.
But more important than gold’s cycle is its inverse correlation with the U.S. dollar. Gold cannot begin a correction unless the U.S. dollar bounces. And the U.S. dollar’s price action is very weak right now. This is typical for USD bear markets, which historically went down in a straight line.

If the USD continues to go down in a straight line without a bounce, gold and silver will go up nonstop without a pullback/correction.
7 am: the Chinese Yuan is leading oil, gold, and silver.
Oil and gold/silver have a strong positive correlation right now because China launched the PetroYuan. The PetroYuan is a mechanism by which China buys oil with Yuan (its own currency), which will be convertible for gold. This effectively links oil with gold.
As a result, the Yuan has become a leading indicator for gold, silver, and oil.

  1. A falling USDCNY (i.e. appreciating Yuan) = bullish for gold, silver, and oil
  2. A rising USDCNY (i.e. depreciating Yuan) = bearish for gold, silver, and oil

USDCNY is falling right now, which is medium-term bullish for gold/silver/oil. When USDCNY starts to bounce, expect a correction in gold/silver/oil.

If USDCNY doesn’t make a bounce right now, expect it to make a bounce at 6-6.1 (previous low in 2014).
7 am: oil’s seasonality is weak in February and strong in March-April.
Oil’s weekly RSI is insanely overbought right now. It has already made a bearish divergence on the daily bar chart, so it can begin to make a pullback/correction.


Oil’s seasonality is relatively weak in February but strong in March-April. Hence, the ideal situation is:

  1. Oil makes a pullback/correction in February to work off its insanely overbought weekly RSI.
  2. Oil continues its bull market rally in March-April with bullish seasonality as a tailwind.

This is oil’s seasonality.

Read Forex & commodities on January 31 2018.

Bottom line

I only trade stocks. These are just my thoughts/outlook on other markets.

  1. Gold and silver will break above their tight range in the first half of 2018.
  2. The USD Index will crater below its final support (90-91) in the first half of 2018.
  3. The best traders I know are still bullish on Bitcoin in the short and long term. I don’t know when the crypto bubble will end.

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