Forex & commodities on January 25, 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’s medium-long term direction has nothing to do with Mnunchin.
  2. Don’t buy the U.S. dollar just because it’s oversold.
  3. The gold:silver ratio is finally acting properly.

3 pm: the USD’s medium-long term direction has nothing to do with Mnunchin
The USD fell yesterday on Mnunchin’s comments about a weak dollar and rose today when Trump went against Mnunchin’s comments.

In reality, the U.S. dollar is in a bear market without or without Trump’s support. Fundamentals are fundamentals, and the U.S. government is not intervening in the currency markets right now.

  1. European and emerging market economies are improving rapidly after a multi-year slump that ended in early-2016. Money is flowing into Europe and emerging markets to chase business opportunities there.
  2. Asset valuations in emerging markets and some European countries are also lower. Money is flowing into these countries in the global search for yield.

These 2 factors will drive a multi-year bear market in the U.S. dollar.
9 am: Don’t buy the U.S. dollar just because it’s oversold.
The USD Index is slicing through support after support right now. It is oversold from a daily perspective.

This doesn’t necessarily mean that a bounce is imminent. Historical USD bear markets went down in a straight line. Oversold momentum became even more oversold, and bearish divergences were extremely common.

In short, don’t buy USD just because it’s oversold. Any bounce will be weak, and then the selloff will continue.
9 am: the gold:silver ratio is finally acting properly.
Previously, I was concerned that gold and silver were going up while the gold:silver ratio was rising as well. A rising gold:silver ratio is a bearish sign. Silver should rise more than gold in a healthy precious metals rally. Hence the gold:silver ratio should fall.
Silver has finally started to outperform gold over the past 2 days. This is a bullish sign.


Read Forex & commodities on January 24, 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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