Forex & commodities on July 14, 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. The USD’s bear market is very clear. USD Index’s support is at 93.
  2. Gold and silver face some clear short term resistances here
  3. There’s still some short term weakness in gold/silver
  4. Euro might face some short term weakness as well.

4 pm: the USD’s bear market is very clear
The USD has literally gone down on every piece of news over the past few weeks. It tanked on today’s economic data (8:30 am).

  1. When U.S. economic data is good, rate hike odds increase = USD down.
  2. When U.S. economic data isn’t very good, rate hike odds decrease = USD down.

The USD can’t catch a bid.
This is normal for USD’s bear markets. In its’ historical bear markets, the USD Index went down in a straight line with very weak bounces along the way.

The USD’s real support is at 93. It’s the USD Index’s prior support and 200 weekly moving average (support confluence). There’s a >50% chance the USD Index will have a sizable bounce there.

When the USD Index reaches 93, USDCAD will also be at a big support ($1.24). That’s the USDCAD’s prior low and 200 weekly moving average.

When the USD Index reaches 93, EURUSD will be at its 200 weekly moving average resistance.

Despite the USD Index’s decline today, EURUSD still hasn’t really broken out from its resistance.

It’s worth noting that USDJPY has turned its 200 hourly moving average from support into resistance.

5 pm: gold and silver face some clear short term resistances
Gold, silver, oil, and commodities are making complicated medium-long term bottoms.
Gold is stuck at its 200 and 50 daily moving averages.

Silver is close to reaching its 18 exponential moving average resistance.
There is a strong daily and intraday inverse correlation between the USD and gold/silver. Today’s gold/silver-USD relationship wasn’t very bullish for gold and silver.

  1. USD tanked at 8:30, and fell throughout the rest of the day.
  2. Gold/silver spiked at 8:30, but did not rise throughout the rest of the day.

Silver and GDX outperformed gold today. This is normal for an uptrend.

Copper is once again pumping up against its $2.7 resistance.

Oil is against its 50 daily moving average resistance, which has guided oil downwards since early-2017.

So the bottom line for gold and silver is simple. Gold, silver, oil, and copper might face some short term selling pressure. But if the USD continues to tank, then all bets are off. Commodities will go up in the short term.
This is why our sister fund invests for the medium-long term and ignores the short term. The short term is unpredictable.
6 am: There’s still some weakness in the precious metals markets.
The medium & long term risk:reward profiles for gold and silver are clearly bullish. However, there’s a >50% chance that silver falls a little more before bottoming (i.e. to $15).
In a healthy uptrend, silver should be stronger than gold. This is clearly not the case right now. Throughout all of yesterday and this morning, silver has been weaker than gold.
Right now, gold is trying to break above its 200 hourly moving average resistance for the second time. Silver isn’t.


Small technical indications such as this aren’t extremely useful. But they do tell you that the short term odds favor the bears.
5 am: EURUSD might face some short term weakness as well.
The U.S. Dollar Index is in a bear market and EURUSD is in a bull market (long term). But perhaps EURUSD will fall a little from its resistance right now.

As our sister fund mentioned yesterday, the main problem for EURUSD bulls is that “smart money commercial hedgers” are extremely bearish on the Euro right now.

You can see the Euro’s short term weakness on the hourly chart. EURUSD has constantly failed to break above its $1.144 resistance. The 200 hourly moving average was EURUSD’s support. But now the EURUSD’s bounces off of this support are becoming weaker and weaker. Close to breaking down.

Our sister fund thinks the probability of a small EURUSD pullback is 60%. These aren’t extremely high odds, so it’s not very useful for traders.
*EURUSD and gold/silver have a positive correlation right now.

Bottom line

Nothing has really changed since our sister fund’s July 12 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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