TECHNICAL OUTLOOK CONCLUSION OIL OIL
The plunge in Crude Oil from 108, through the 33.20 long-term objective for January 2016, to 26 not only produced the strongest medium-term divergences in 15 years [stronger than
from
the plunge in 2009], but also waning bearish medium-term momentum. We are forecasting a retest of 56.55 strong medium- term resistance through July 2016, then lower again to 33.20 in October 2016 in a broad, medium-term consolidation [33.20 – 56.55] into February 2017.
The impact of the price of
Crude Oil on other assets has varied and diverged from normal levels of correlation for the past
year. In part, it is a question of whether the “tail [Crude Oil] is wagging the dog [ U.S. Dollar]”. I believe that Crude Oil will slightly dampen the bullish view for the USD over the next month, but then the Dollar will show its bull market momentum and forge ahead, against the Euro in particular, as forecast above. This interplay with Crude Oil ratcheting up in the corrective rally versus EUR/ USD declining to new medium- term lows into June will add to the volatility and uncertainty as is the trademark of the last two years. After the correction to 56.55, the decline to 33.20 will increase bullish momentum in the U.S. Dollar and complete the forecast objectives through the fourth quarter of 2016.
In a complicated summary, the U.S. Dollar remains bullish through October 2016. The USD/ JPY will increase volatility in the currency market as the further 4% decline will move in conflict with EUR/USD for the next four months. In commodities, Gold has already completed its corrective rally in consort with the EUR/USD corrective rally in the first quarter, but will resume its decline to a final long-term low and bottoming formation into the end of this year. Crude Oil is like USD/JPY as they counter trend
to the forecast resumption of the Dollar bull market, thus increasing the global market volatility into October 2016. Lastly, and in the big picture, USD/CHF and EUR/ CHF both indicate that we are in the final stages of the forecast seven-year bull market in the U.S. Dollar culminating into the end of 2016. After a probable year-long top building in the Dollar and bottom building in commodities through 2017, we are likely to see the emergence of a new bullish market in commodities beginning in 2018 reversing recent trends.
Good luck and good trading!
Keith Raphael President
Crosscurrents Investment Advisory FX TRADER MAGAZINE April - June 2016 21
FX
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