FX CURRENCY WATCH
and second quarters of 2018 will begin to normalize the correlations that were lost in the volatility and uncertainty that have been trademarks of the last two and a half years.
SUMMARY USD/JPY
through November 2017 to complete the long-term decline. We continue to forecast the subsequent medium-term consolidation [1215 – 1359] through February 2018. Tis change in the depth of the forecast final decline is underscoring the correlation with the now neutral U.S. Dollar forecast. We continue to stress that this consolidation is the formation of the long-term bottom for Gold, reinforced by the expected minor retracement in EUR/ USD to only 1.1445 through November 2017. Only a monthly close back above 1377 would terminate the forecast further decline, and commence a rally to retest 1525 strong long-term resistance over the subsequent six months.
OIL
As discussed in the last six 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
30 FX TRADER MAGAZINE October - December 2017
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. Aſter a prolonged irregular top building extended through the first quarter of 2017, we continue to forecast the corrective decline to 39.20, out to November 2017 from August, still in the broad, medium-term consolidation view [33.20 – 56.55] through February 2018. Only a monthly close above 56.55 would avert the decline to 39.20, and commence a rally to 77.90 over nine months.
Te impact of the price of Crude Oil on other assets has varied and diverged from normal levels of correlation for the past year and a half. In part, it is a question of whether the “tail [Crude Oil] is wagging the dog [ U.S. Dollar]”. I continue to believe that the decline in Crude Oil to 39.20 will be correlated with the remaining corrective Dollar rally against the Euro in November 2018. Te first
Te U.S. Dollar continue to build its long-term top, and the relatively dull medium-term consolidation in EUR/ CHF [1.0815 - 1.2040] will conclude with a EUR/USD rally into March 2018. Aſter a rally in USD/JPY to 115.75, a decline again toward 108.15 through January will reinforce the imminent new leg down in the Dollar.
In commodities, Gold, 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 late 2017. As the Crude Oil forecast remains fully intact, the forecast decline to retest 39.20 will support the Dollar as it completes 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 late 2017. Aſter a probable year-long top building in the Dollar and bottom building in commodities through 2017, we continue to forecast 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
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