US DOLLAR WATCH Summary
In a similar summary to the prior quarter, the U.S. Dollar remains bullish through
the second
quarter of 2017. After the volatile, incongruous decline in USD/ JPY as EUR/USD maintained stability in its completion of the medium-term corrective top, the forecast subsequent rally to and through 111.45 increased bullish momentum in the U.S. Dollar. We continue to forecast the strong further decline in EUR/USD to 93.30. In
commodities, Gold, OIL
– 1310] through October 2017. Tis consolidation is the formation of the long-term bottom for Gold, reinforced by the expected divergences from the further rally in the Dollar through January 2017. Only a monthly close back above 1338 would neutralize the bearish medium-term outlook,
terminate
a retest of 1044, and commence a rally to retest 1525 strong long-term resistance over the subsequent six months.
OIL
As discussed in the last three quarters of articles in FX Trader Magazine, the plunge in Crude Oil from 108, through the 33.20 long-term objective for January 2016, to 26 produced the strongest medium-term divergences in 15 years [stronger than from the plunge in 2009]. As a result, we have rallied shy of the 56.55 medium-term corrective objective for November
2016, and now forecast a decline to retest 33.20 weak medium-term support, out to March from January 2017,
in a broad, medium-term
consolidation [33.20 – 56.55] into August 2017.
Te 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 continue to believe that, like the Crude Oil rally slightly dampened the bullish view for the USD over the last few months, the independent resumption of the Dollar rally, against the Euro in particular, as forecast above, will dampen the price for Crude Oil to 33.20. Te first quarter trends will begin to normalize the correlations through late 2017, lost in the volatility and uncertainty that have been trademarks of the last two years.
which completed its forecast corrective rally in consort with the EUR/USD corrective
rally,
continues its forecast decline to a final long-term low and bottoming formation through the middle of 2017. Crude Oil and USD/JPY are no longer counter trending and causing excessive volatility the Dollar resumes its bull market. Lastly, and in the big picture, USD/CHF and EUR/CHF both continue to indicate that we are in the final stages of the forecast seven-year bull market in the U.S. Dollar culminating through the first quarter of 2017. After a probable year-long top building in the Dollar and bottom building in commodities through 2017, we are forecasting an emergence of a new bull market in commodities beginning in 2018, reversing recent trends. Good luck and good trading!
Keith Raphael President
Crosscurrents Investment Advisory FX TRADER MAGAZINE January - March 2017 31
FX
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