The ECB rate decision and press conference was Thursday 7/16/20. During last week, the euro moves higher so the dollar drops like a rock. The dollar/yen pair also drops (stronger yen). The dollar move is mainly against the euro and yen and not so much on the other currencies. The collapse in the dollar sends gold and silver to the moon. Gold was set to top out on the weekly chart about now or in the days ahead so this momentum push will likely push the multi-week top in gold forward a couple weeks.
The main question is how much downside strength is in the dollar going forward. Note how the dollar has dropped ever since late March which directly corresponds to when the stock market rally began. The lower dollar pumps commodities, oil, gold and silver higher and the respective stock derivatives and mining plays in the sector which pumps the broad stock market higher. A weaker dollar is the stock market's best friend.
The dollar is at lows not seen since September 2018; almost 2 years ago. Price has violated the lower band so the middle band at 98.6 is on the table and upper band at 102.58. The RSI, histogram, MACD and stochastics are all sloping lower which forecasts lower lows in the dollar in the few weeks ahead. The ROC is positively diverged and stochastics are overbot which may help the dollar receive a dead-cat bounce on the weekly basis. However, after any bounce, the dollar will become soggy again and seek out matching lows again on this weekly basis.
The trend lower in the dollar for the last 4 months is NOT a strong trend lower as evidenced by the ADX. The last strong trend was the upside rally during 2018 but that petered out in the Fall 2018. The negative cross occurs on the Aroon which predicts more bearish action ahead for the dollar but the red line is already pegged at one hundo with nowhere to go but down which is bullish for the dollar. Price is extended to the downside below the moving averages so a mean reversion higher is needed. The currencies, gold and silver trade on emotion and central bank news; this will continue.
A weaker dollar will continue to help the stock market as well as gold, silver and other PM's, however, an interesting fractal (blue square) is in play. Back when everyone was drunk as skunks buying stocks with reckless abandon in January and early February, the dollar ran from band to band to the downside violating the lower band. Wheeee! Whooopie! Everyone was happy buying stocks without a care since the dollar will keep dropping. Boooiiinnnggg. The dollar spikes during early March crushing the stock market and gold. Be on guard for this happening again.
The dollar is difficult to forecast due to its 2 years of sideways choppiness and susceptibility to any news bite any minute. The best estimate is sideways choppiness at these lows for one to three weeks then a move higher in the dollar. It all depends on when positive divergence forms with the indicators or if a news bite hits that sends the dollar radically higher. The dollar is at 94.4. Euro 1.1653. Gold 1907. When the dollar printed the LOD on Friday that was the exact time that the 1900 print occurred with gold. In the last few days,the euro pops up through 1.15, then through 1.16 now through 1.165.
The 2-day Fed meeting begins Tuesday with Chairman Powell on tap Wednesday afternoon. Stocks are usually bullish into the Fed decisions. The dollar weakens as traders anticipate a dovish Fed and more easy money. The dollar also moves lower on escalating tensions between the US and China and the ongoing bush league handling for the coronavirus pandemic and add on top of this mix the presidential election uncertainty. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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