Forex & commodities on January 12, 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. The U.S. dollar is starting to break down from multi-year support.
  2. You have to look at the currency pairs seperately.
  3. A major problem for the Euro is mostly over.

3 pm. The U.S. dollar is (finally) starting to break down.
Here’s the USD Index on a daily chart. It has broken down from its final support (91). Hopefully this is not a false breakdown.

This breakdown is from multi-year support, which means that the USD’s downtrend is firmly in play. The next support is far below at 88.

9 am: USDCAD is not sending a bullish sign for the entire USD Index.
Many traders believe that USDCAD leads the USD Index. This may be true in some cases, but not today.
USDCAD has been strong over the past few months. It has not made a new low, while the EURUSD has already made a new high.

This is not abnormal. It is the result of the NAFTA renegotiation talks. NAFTA renegotiation only impacts the USDCAD and USDMXN. It does not impact the Euro! NAFTA has nothing to do with the Eurozone.
And since the Euro accounts for 57% of the USD Index, NAFTA renegotiation will not cause a big rally in the USD Index.
9 am: a major problem for the Euro is mostly over.
Merkel has struck a coalition deal with the SPD. Germany’s political problems are mostly over.
As a result, the Euro is starting to breakout.

The Merkel problem began on September 24, 2017 (German election). The Euro’s rally stopped around that time. Now that the Merkel problem is over, I expect the Euro to continue its rally.
And the U.S. dollar is on the verge of breaking down.

If the U.S. dollar breaks below this level (and more importantly breaks below 90), then its medium term direction is decisively DOWN. NAFTA talks may cause a USD bounce along the way, but the the USD’s medium term direction is still decisively DOWN.

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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