Forex & commodities on January 4, 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. USD is waiting for Merkel trigger to breakdown.
  2. Oil is at a big resistance right now
  3. Strong European economy is bringing EURUSD up.
  4. China’s plan to slowly destroy the USD is on schedule.

4 pm: USD is waiting for Merkel trigger to breakdown
USD is on the verge of breaking below its massive support. Once it breaks below this support, it will grind down until 87. (There are no supports in between).

The USD is waiting for Merkel. If Merkel announces a coalition (i.e. forms a government) by late-January, then EURUSD will surge and the USD Index will finally break down.
3 pm: oil is at a big resistance right now
Yesterday I stated that oil’s weekly RSI can’t get much higher. In addition, oil is at a big resistance.

These 2 factors (high weekly RSI and big resistance) combine to paint a picture: oil can’t go much higher in the medium term.
8 am: Strong European economic data is boosting the Euro.
The Euro’s price action vs its economic data is normal and bullish.
Germany’s economic data is strong. (Germany is Europe’s economic engine). Unemployment just hit a new low and the CPI moved higher.
The EURUSD is reacting to this news in a normal and bullish manner by moving higher.

Meanwhile the USD’s price action continues to be very weak. The USD Index can hardly bounce even though its at major support.

7 am: China’s plan to slowly destroy the USD is on schedule.
In this post I discussed China’s plan to diminish the USD over the next few years.

The world currently buy and sells oil in USD. This is a huge source of demand for the USD, which props up the value of this currency.
China is trying to establish the PetroYuan, in which the buying and selling of oil with China will be settled with Chinese Yuan instead of the U.S. dollar. This will reduce the long term demand for the U.S. dollar.

A key step to establishing the PetroYuan is the creation of oil futures contracts denominated in Yuan. It was originally rumored that Yuan-denominated oil futures would launch in December 2017. This launch date has been slightly delayed.

  1. The Communist Party approved Yuan-denominated oil futures in December.
  2. These futures will probably launch on January 18. This officially kicks off the PetroYuan, which means that demand for the PetroDollar will slowly decline over the next few years.

This is a long term bearish factor for the U.S. Dollar. Chinese demand for oil is massive, and all of these imports will now be paid for in Yuan instead of USD.

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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