Forex & commodities on July 12, 2017: thoughts & outlook


These are our sister fund’s thoughts on the currency and commodities markets. They trade gold/silver using a discretionary approach. We trade the S&P 500 using our quantitative models.
*Go to our homepage for their latest thoughts. We update this webpage throughout the day.

Thoughts

  1. Some short term silver weakness
  2. No triggers/news are pushing the U.S. dollar up.
  3. USDJPY is falling from its resistance.
  4. Silver’s post-crash bottoms are rarely V-shaped.

5 pm: some short term silver weakness
As our sister fund mentioned this morning, silver will likely face some short term weakness in the next few days/weeks. But the medium-long term is bullish.
Both gold and silver are being pressed down by their 200 hourly moving averages.


Even oil’s turnaround is going to take some time. Despite today’s massive inventory drawdown, oil fell a little.
Gold/silver are still correlated with EURUSD on the intraday. As long as EURUSD is in a bullmarket, gold/silver are in bull markets too.
4 pm: the U.S. dollar is going down on everything.
In the currency markets, the path of least resistance is the trend. And right now, no triggers are pushing the U.S. dollar up. This is the standard for a USD bear market.
There was nothing surprising in Yellen’s testimony today. After spiking at 9 am, the USD did not follow through on the upside. Bearish.
Here’s the U.S. Dollar Index’s hourly bar chart.

USD bulls are buying every dip, and they’re getting killed on every dip. Traders have become accustomed to the USD’s consolidation from 2015-2016. It’s now a bear market.
The U.S. dollar is firmly capped by its 200 hourly moving average resistance.
The interesting thing today is that all the currency pairs went their own separate ways.
EURUSD went down, but is still supported on its 200 hourly moving average support. See below.

USDJPY is sinking. Broke below its 200 hourly moving average support. See below.

USDCAD tanked after the Bank of Canada hiked interest rates for the first time in years. There was nothing surprising about the Bank of Canada’s announcement today. In fact, the CAD’s reaction is very similar to the Euro. Everyone knows that the Bank of Canada and ECB are on the path towards tightening. CAD and Euro are going up in the long term. Rate hike announcements are just triggers.

6 am: USDJPY is falling from its resistance.
As our sister fund stated, the USDJPY cannot be in a big bull market if EURUSD is in a bull market and the USD Index is in a bear market.
After a few days of being stronger than other currencies, the Yen is the only ex-USD currency that’s falling right now. USDJPY is backing down from its resistance. Bearish for the USD.

Yellen is set to testify before Congress today. She won’t say anything surprising. Perhaps the USD will rise on her testimony, or perhaps the USD will fall. Who cares. There is nothing she can say to reverse the USD’s bear market. The USD Index is down too much (from more than 103 to below 96).
6 am: Silver’s post-crash bottoms are rarely V-shaped.
Silver flash-crashed on July 7. Bottoms after flash-crashes are rarely V-shaped. The market usually faces some short term resistance over the next few weeks before rallying.
This is silver’s crash in December 2014.

This is silver’s crash in June 2013:

Silver’s 200 hourly moving average is fast approaching at $16, and gold’s 200 hourly moving average is fast approaching at $1224.
So perhaps silver will consolidate or fall a little bit over the next few weeks. Who knows. Our sister fund ignores short term movements in gold silver. The short term is very unpredictable, no matter how high the historical odds are. The medium and long term risk:reward profiles favor bulls right now.

Bottom line

Nothing has really changed since our sister fund’s July 11 market outlook.

  1. Our sister fund thinks that the U.S. dollar (USD Index) is in a bear market. Money Flow determines the U.S. dollar’s bull/bear markets. Right now, money is flowing away from the U.S. to Europe and emerging markets.
  2. Our sister fund thinks gold and silver are in bull markets.
  3. Our sister fund has been 100% long USLV (3x silver ETF) since June 30, 2017. Entry price: silver was at $16.62, USLV was at $11.84.
  4. Our sister fund makes medium-long term investments.

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