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The primary focus in today’s discussion was on the reversal-day the US Dollar Index (DXY) put in at the bottom of long-term support. The trend has been extremely one-sided and various sentiment metrics have expressed this much. The data-flow hasn’t been supportive of a higher USD. All-in-all, this is setting the market up for an inflection point as the bad news is priced in, and again with the DXY at the low-end of a long-term support zone (back to ’98) there is reason to think shorts may soon be caught off guard. Yesterday’s reversal-bar was just one-day, but could be the start of a tradeable rebound. EURUSD put in key reversal bar after trading just beyond the 2012 low. GBPUSD also put in a nice reversal day on a retest of a recently broken trend-line. USDJPY found lots of sponsorship as not only did USD find broad buying but safe-haven YEN buyers fled as fear regarding North Korea abated. Generally speaking, from a risk/reward standpoint the trend in USD has reached a point where we can reasonably expect to see some type of low to form, if it hasn’t already.
Precious metals took a hit off their highs yesterday as North Korea fears diminished and USD traded strongly off its lows. Gold put in its own key reversal bar off the upper parallel of a channel which has been keeping it pointed higher for several weeks. This shifts the focus immediately lower, but as long as the lower parallel holds along with the double-tops from April/June, then gold will keep a more broadly bullish bias intact. Silver pulled back off the July 2016 trend-line, also shifting immediate focus lower. Like gold, the lower parallel matters. Keep an eye on USD and its influence moving forward.
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Crude oil, as discussed yesterday, appears to be headed lower, and now that it not only broke a rising channel in place since June, but the key 47-level has been cleanly broken as well. Stay below 47 and sellers are in control.
We saw a snapback yesterday on the gap-down open in U.S. indices, which keeps them continuing to grind. Price action is in limbo right now. Looking at the Nasdaq 100, we have maybe the cleanest picture, with a bull-flag coming to shape. Still need some more time for confidence to build, but it’s a possibility on our radar. The DAX may find some help from a weak euro should we see the single-currency decline, but it has its work cut out for it on the upside. It remains the ‘go-to’ index for shorts. The FTSE 100 held the 7300-level after a minor breach yesterday. This keeps the outlook neutral.
For full technical considerations, please see the video above…
---Written by Paul Robinson, Market Analyst
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