Let’s look at the charts for the U.S. Dollar, Gold, Crude Oil The Stock Market and the Major Pairs.
Once again, it’s been in my respectful opinion, that the Fed is coming under a little bit of maybe political pressure, but they actually use the terminology insurance cut. Now, that’s a terminology that I actually used in VantagePoint’s live training room to discuss this saying, “They’re going to be looking for an out. And so, they’re saying that they’re cutting rates now as an insurance against the trade war, against all of these things.” But again, it’s in my respectful opinion, it’s more interfering in the market than actually helping it.
Needless to say, the trade war is back on the dollar, briefly rallied, the equity markets briefly rallied, and then crashed. The dollar is moving lower with the S&P 500. This is the direct inner market correlation that we want to know and understand. Now, when we look at our medium-term crossing our long predicted difference, as the dollar was rising, it was rising for all of the wrong reasons. Now, the medium-term crossing the long-predicted difference, basically warned us several days ago that this dollar is maybe not as strong as what it appears to be. And sure enough, it’s moving lower.
Now, our key support coming into this week is now 9742, but the majority of the indicators are warning that we’re heading lower here. Now, we have real-world dollar demand. All of this other stuff here, guys… The FOMC, the non-farm payroll, the yada, yada, yada, it’s all just… A lot of this is basically noise, guys. When we look at real US dollar demand, we know that demand is usually around the end of the month and the first week of the new month. But then once that that demand is filled, supply kicks in, and the price usually goes lower towards the middle of the month. It’s very unlikely that we’re going to see a huge rally in the dollar here. More sideways to downward action is very likely. We want to watch this level very closely.
The other level we want to use to gauge this is the VantagePoint predicted moving average by itself. Now, that long-predicted coming in at 9792, we’re closing at 97 85. In most cases, whatever price action you have on Friday, it extends into Monday and then Tuesday we can see somewhat of a reversal, so when they look closer at that non-farm payroll number from Friday, I think the market’s going to win. It’s going to be an agreement that it’s a pretty decent all the way around. It’s a pretty decent number and it’s not really supporting any further rate cuts. That doesn’t mean the Fed isn’t going to do that, but for now, these are the two levels and the dollar we want to watch and to see if we continue to have the indicators pointing to downward momentum.
The Gold Market
Now, this is helping gold rally back up again. If we can take out this upper level here, that high coming in of round 1467, I’d say there’s a very strong possibility as we start moving into September, October, that we easily pushed through that 1500 mark. But again, we’ll have to see, but right now we do have a buy signal for me here. Our RSI is rising but a little bit steep, but the main thing we want to look at is you can see how the predicted OSI is bouncing off the 40 level. Now if we break down below 40 we’ve got momentum. If we break above 60 we have upward momentum, so the gold clearly has upward momentum here, but a lot of factors are driving that. The trade war, the rate cuts, all of these different things, but there appears to be real-world demand for gold, and this is not something that just happened guys last week or two weeks ago or even a month ago.
This body’s signal on gold came into effect basically back on June the first, May the 30th, and it’s more or less been going up ever since. Now we’re getting a little into a little bit of sideways chop here between 1400 and 1467 but the probability that this range, this very tight consolidation range breaks in the coming days and weeks ahead, is very high given the current market conditions. Now, none of this benefits stocks in any particular way. I’ve been a very, very strong advocate for shorting the S&P 500 anywhere above 2950 and 2980 and a premium short, which we did in the live training room this past week at 3026, that was a very, very good short. We’ve got significant resistance building up here. The only thing I’ll say about the trade war here guys is China is not like any other country.
They don’t play the short game. They play the long game. They can play the long game on this trade war for the next 50 years guys. That’s all I can say. And they have no reason to come to the table for the most part. So we’ll see how this one plays out. But I’m sure there’s going to be more tweets this coming week. There’s nothing we can do about that. But overall, just remember China does not play the short game here. They’ll be in this thing. They’re not in this for days, or weeks, or months, or maybe even years. It could be potentially decades. I don’t see the trade war being resolved anytime soon to be clear. Now with the other commodities, they should start rising slowly here too.
Now oil again, we should still have about at least another month, month and a half of fairly firm oil prices. I don’t see us going down below $51 a barrel. I think it’s still a buy on dip on dips, excuse me, while we’re in summer driving season, oil notoriously is from during this period, so for now when we look at oil, everything still looks like it’s basically just moving sideways, back and forth between essentially $61 a barrel and then on the lowest side of this we’re $50.85, $51 a barrel. That range is a 90% probability that this range is going to hold. Buying on dips, if we can get down a little bit lower, very, very reasonable play.
Forex Weekly Outlook for Major Pairs
Euro/U.S. Dollar (EUR/USD)
Now as we go into our main forex pairs, the Euro US, the first thing we want to understand guys are inner market correlation. Very, very important. The Euro is not correlated to the currently correlated to the S&P 500 on a positive basis.
It’s more inverse. I’ve been making this argument for several, probably the last six or seven months. There was a very strong positive correlation between stocks in the Euro, but that’s broken down guys. The correlation is the US dollar. US dollar down, S&P 500 been moving lower. Gold moving higher means the Euro is likely going to move higher. We have the medium-term crossing the longterm predicted difference, several days ago last week warning us, we got a false break on some of the headline news. Which, remember guys, for the most part, is largely just noise and you can see that basically a classic bear trap down here where the market makers are basically running stops on the Euro below the 11084, only for it to turn around and reverse. Now our key VantagePoint pivot area coming into this week 11167, that is the area we want to watch very closely to see if we can break above it.
When we click on our F8, here our intraday pivot area using our predicted moving average alone is coming in at 11115. we should be able to overtake 11115 probably by midday Monday or Tuesday. There is still some downside risk with the Euro. The Euro is still structurally weak but it comes down to who is the prettiest horse in the glue factory. Basically, that’s the scenario here. So 11115, we get above that. That’ll allow us to target back towards the 112. But it’s not looking overly great for the dollar with everything that’s coming into play here, but the dollar remains firm. But if equities continue to crash that means gold’s going higher, which indirectly will send the Euro likely up against the dollar, not down.
U.S. Dollar/Swiss Franc (USD/CHF)
Now when we look at payers like US-Swiss Franc, the counterpart to Euro US, you can see here that our medium-term crossing, our long term predicted difference. We’re breaking down below that critical pivot area. 9889 and we are coming into some pretty heavy support here guys, but understanding this payer is understanding in our market analysis. If stocks continue to move lower, which is very likely, then two specific payers will follow. US-Swiss Franc will move lower, dollar-yen will move lower.
It is, for the most part, the same trade, so keep an eye on this right now. With everything that’s happening in the market, there’s very, very little reason to buy US-Swiss Franc, even though it makes perfect sense based on the carry trade, which is the infant interest rate differential between the US and the Swiss, which is the maximum two and a half percent on the US dollar side, the overnight… Well, two and a quarter now after the rate cut. And then the Swiss franc at negative .75. So the market predominantly wants to buy this pair. It should be an easy trade, but as you can see, it’s not. Shorts are clearly favored on this.
British Pound/U.S. Dollar (GBP/USD)
Now with the pound dollar next week, we’re starting to get some support bunching up down here. We’ll just kind of put a line in here so everybody can see this. Not a lot of sellers down here, but you can see that we’ve got our medium-term crossing the longterm predicted difference in the opposite direction in which the market’s moving. One of the most powerful indicators in the software, because it’s measuring the medium-term trend against the longer-term trend. I would be looking for longs on this pair, but I think we’re going to have one more little bit of a push maybe towards the 120 area, but the VantagePoint software is warning that we could already be running out of steam. Now the headlines out of the UK are unlikely to change anytime soon with Boris Johnson now going after the Brexit deal, they’re talking about a hard exit, all these different things.
So that’s not going change a lot here guys. We’re still going to see that. So be careful with the British pound US dollar. Be careful with the cross pairs, with anything with the British pound in it because again, this is a very, very volatile currency right now.
U.S. Dollar/Japanese Yen (GBP/JPY)
Now as we go into the dollar-yen pair, again the same trade you can see is US-Swiss Franc. We’re starting to take out a major support level here. That level is coming in around 10678. Now, here’s the warning that I’ll give you guys, is that a lot of times when we get into major support, you can see that we’re channeling between the 10950 and the 10670 area that we can get potential false breaks here. So if you’re trading this pair or anything with Japan in it, you want to watch the stock market very, very closely because that’s going to tell the tale of where this is going.
Now when the medium-term crossing the longterm predicted difference to the downside, we can see here in the VantagePoint software that that was actually you had more than one day to get into this trade. If you know what you’re looking for. We’re breaking down here, more importantly, if we click on our F8, when we break down below here, the very next day we get followed through, but we’re looking for the stocks. If we’re going to continue to short this pair, we need the S&P 500, the Nikai, the Dax all moving lowers. Watch those very closely. But we may be a little bit overextended. Our retracement point we’re looking for next week would be 10786. we can reassess at that time. However, if the stocks, if things escalate between the US and China, this pair could move down two or 300 pips very, very quickly.
The Commodities Currencies
U.S. Dollar/Canadian Dollar (USD/CAD)
Now with our three main commodity currencies, US CAD, once again, be very cautious of a false break above 13268. You can see that we’ve got a verified zone sitting right here. Again, that’s coming in at or about the 132 level. We’re going to see if we can continue to hold above 132 next week. If we can going into Tuesday and Wednesday, then we may have a very good long trade, potentially back towards the 13430 area. But first and foremost, we must break free and clear and hold above 132 till at least midday Tuesday. If we’re not holding above 132 guys, remember, commodities are strengthening and that should help the CAD, the Ausi, and the New Zealand. Right now, the indicators, again, a medium-term predicted difference, warning us, we’re in an overbought condition. The probability that this pair moves aggressively higher, my optimism on that remains heavily guarded at this particular time.
Australian Dollar/U.S. Dollar (AUD/USD)
The same thing with the downside on Ausi US and New Zealand US. We’ve had a big move down on the Ausi here in the trade war. We’ve got all these different factors here, but mainly that US dollar strength that was building leading into the Fed. When we’re looking at this right now, gold turning around, we’re already getting a warning sign here that we’ve got a potential by forming on Ausi US, medium-term crossing the longterm predicted difference. Nine times out of 10 guys, that’s usually the end of a rally, not the beginning. So when this pink line crosses that blue line, that warns us, if anything, if nothing else, we don’t want to get aggressively short down here. The RBA next week likely going to cut, but again soar all the other central banks.
New Zealand Dollar/U.S. Dollar (NZD/USD)
So Ausi is a very strong correlation to both gold, silver, iron, all iron or all of these things. If metals are moving higher, the probability that the Ausi is going to follow that. The same thing would apply to New Zealand. You can see that we’re coming into the bottom end of this range. 6486, I believe the bottom end of this range on both the Ausi and the New Zealand is going to hold. You can see the same signal forming here. We’re in an oversold condition. We’re just waiting for the neural index to confirm. So we can look to potentially get long on this based around a broader US dollar. Weaker US dollar, excuse me, in the middle of the month.
So with that said, this is the Forex Weekly. Look for the week of August the 5th, 2019.