Forex & commodities on March 12, 2018: outlook


Here are my discretionary thoughts on forex and commodities. I only trade the stock market.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. “Smart money” is still bullish on silver and slightly bearish on gold.
  2. Perhaps the U.S. Dollar will make a bigger bounce here.
  3. “Smart money” commercial hedgers are still very bullish on the USD.

3 am: “Smart money” is still bullish on silver and slightly bearish on gold.
Commercial hedgers are still bullish on silver in the latest COT report.
Here’s silver.

Here’s gold.

There’s a simple reason for the divergence between silver and gold. The gold:silver ratio is extremely high right now and the smart money expects it to come down. The ratio will fall as long as silver rises more than gold.

3 am: Perhaps the U.S. Dollar will make a bigger bounce here.
I originally expected the U.S. Dollar Index’s bounce to be quick. I didn’t expect it to last this long.
Perhaps I was wrong. Perhaps the U.S. Dollar Index will make a bigger bounce and EURUSD will make a bigger pullback.
You can see that EURUSD is stuck at a multi-year resistance trendline.

There’s a possibility that the EURUSD will make a bigger pullback from this trendline resistance and the USD Index will make a bigger bounce.
3 am: “Smart money” commercial hedgers are still very bullish on the U.S. Dollar.
Commercial hedgers in the latest COT report are still extremely bullish on the U.S. Dollar Index. Combine this with EURUSD’s resistance trendline and you can quickly see the case for a bigger bounce in the USD.

Bottom line

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

  1. Gold and silver are in bull markets.
  2. I’ve decided to buy some gold and silver as long term investments.
  3. The U.S. Dollar is in a bear market.

5 comments add yours

  1. hi troy,
    how to you interpret the COT as smart money is bullish USD? is it the dashed line or red solid line?

    • Red line. That’s the hedgers position as a percentage. Absolute value isn’t very useful

  2. I thought the COT reports weren’t trust worthy when it comes to FX and that it wouldn’t be uncommon for commercial hedgers to be bullish in a dollar bear market?

    • The of its a very strong bear market. It this bear market seems to be different from the previous 2 bear markets. It’s not going down in a straight line the way the others were. Price action is different

    • COT data to me is similar to backward looking economic data… It gives a good background color to the market if you are doing a weekly or quarterly portfolio adjustment… But for more nimble traders, this data is not that useful. I am a macro trader and agree with the view though. Looking at front-end rates market, it seems like a dollar squeeze could be imminent. Fraois and other credit spreads indicate dollar shortage in the market. Technically, xau looks dangerous toward 1290. In times of funding market distress, xau is a poor hedge as EM players puke it out for usd. But no worries – its nowhere as bad as in 2008… Goodluck

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