Forex & commodities on January 2, 2018: 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.

Thoughts

  1. Where will the USD find support if it breaks down?
  2. Gold will probably go higher in the short term.
  3. The USD’s bull market will not extend beyond 2018.
  4. Bitcoin will probably retest its 20 weekly exponential moving average.

3 pm: Where will the USD find support if it breaks down?
I don’t expect the USD Index to breakdown below 90 right now. I still think that the USD will swing sideways before decisively breaking down in the second half of 2018.
But let’s assume I’m wrong. Where will the USD Index find support if it breaks down in the next few weeks?
The next major support is far below at 87.3. This is the 50% retracement of the entire previous bull market.

Notice thatthe USD Index is supported on its 38.2% retracement right now.
87 on the USD Index = a EURUSD target of $1.25 (38.2% retracement).

3 pm: Gold will probably go higher in the short term.
Gold’s 4 hour RSI is extremely high right now.

Extremely high RSI’s are usually followed by bearish divergences (see the chart below). Gold has not made a bearish divergence yet. This means that gold will probably go up in the short term before making a medium term top.

4 am: the USD is in a bear market or a very limited bull market.
Time cycles work well in the forex markets. Both of the USD’s historical bull markets lasted less than 7 years.

If the USD makes a new high in this bull market, then the current bull market will have lasted 6.5 years already. Based on a TIME cycle, the current bull market should not last more than 7 years (i.e. shouldn’t last into 2019). This means that even if the USD’s prior bull market continues, it’s rally is severely limited.
Granted, there are only 2 historical USD bull markets to base this opinion on. The more data the better. But this is still somewhat meaningful because long term cycles are more valid than short term cycles.
The USD’s bull market is not 100% dead yet. It still needs to break main support.

4 am: Bitcoin will probably retest its 20 weekly ema
*I do not trade crypto, but I do follow it.
Some of the best crypto traders I know think that Bitcoin will retest its 20 weekly exponential moving average. Bitcoin has gone parabolic, even on a log scale. Hence, Bitcoin needs to reconnect with its basic support.
The 20 weekly ema has been terrific support since Bitcoin bottomed in 2015. See the following log scale chart.

Bottom line

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

  1. Gold and silver will remain within their wide range during the first half of 2018. Then gold and silver will rally strongly in the second half of 2018.
  2. The USD Index will remain within this range (i.e. 90-96) during the first half of 2018. Then the USD will crater below this range in the second half of 2018. The USD is long term bearish.
  3. The best traders I know are still bullish on Bitcoin in the short and long term. I agree with them only to the extent that this bubble has a few months left. See “the pigs are flying” in this post.

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