Blogs

NEW ZEALAND DOLLAR DECLINE CLOSE TO REVERSAL

"Pity the commodity investor.The Bloomberg Commodities Index is holding losses after dropping Monday to a 13-year low, weaker than after the banking meltdown of 2008 and the euro-zone crisis of 2012. From oil to copper to sugar, little has escaped the rout in the year’s worst-performing asset class." Bloomberg reporting on the commodity rout which saw gold down at a five year low and a headline stating "Investors see no reason to buy gold". Could the hint of a reversal be seen in the outlook for the US dollar.

BRITISH POUND TO OUTPERFORM THE EURO

For four months the GBP/EUR has been consolidating and finally it has broken out to the upside through the resistance just below 1.4200. In our blog of June 24 we were expecting weakness in the EUR relative to gold but nothing has yet transpired but now we can see weakness in the EUR being displayed against GBP. The GBP/EUR exchange rate has the potential to reach 15.5000 as the advance unfolds and the InvesTRAC forecaster is suggesting that the rise should continue until August 10 before correction.

GOLD PRICED IN EUR: TO RISE?

 The gold price denominated in Euro has signalled that it is going higher according to the InvesTRAC short term model...the forecast is that there could be a sharp rise over the next three weeks. Is this telling us that the EURO is going to weaken sharply?

The chart alongside shows that a close above EUR1075 is needed to signal that a breakout is underway whereas a close below 1040.60 would prove that InvesTRAC's model got it wrong.

IF BRENT CRUDE WEAKENS THROUGH ITS UPTREND US DOLLAR INDEX GOES UP

Since June last year the oil price has been falling and the US dollar has been strong. Take the fact that there is an oil glut out of the equation there is no denying that strong dollar translates into weak oil price...it follows that most commodities are weak against a strong dollar because prices are dollar denominated. Now we have an interesting situation which you can see in the chart below....the bottom half shows the Brent crude oil price rallying after its big decline and the US dollar index (top half) declining after its big rise.

USDJPY ON ITS WAY TO 140.00

The USDJPY has moved sideways for about six months in a corrective pattern but now it has embarked on its expected rise. Dollar strength should be evident against most currencies but aGainst the Japanese yen it would seem to have a great deal of immediate potential. The daily chaRt of USDJPY below shows that it is now through its tops and is on its way to higher levels...the measured move suggests a target of +-140 but it could push on to +-145 last seen in July 1998 with InvesTRAC forecast of strength until October.

US 30 YEAR YIELD TO RISE FASTER THAN 2 YEAR YIELD

One of the misconceptions that prevails is the the Fed will dictate when interest rates go up. Not true... the Fed will respond to market forces. And the evidence is that US yields are going up ...InvesTRAC's forecast model expexts yields to rise until late May, drop through June and then rise into August/Septmber. The interesting factor is that the long end is going to rise faster than the short end which we can see in the weekly chart below.

EXPECT THE DOW TO MOVE SHARPLY ANYTIME SOON

My blog of April 17 was entitled "Let the excitement begin" and we are still waiting two weeks later but the waiting could soon be over. I want to take you straight to the daily chart of the Dow and you will notice levels at 18175.5 and 17917.3 which have been highlighted because on or other is going to give way and allow a rise to +-18500 to encounter the overhead resistance line or else drop very sharply to test the October low at 15855.7. Which way?

EXPECT THE DOW TO MOVE SHARPLY ANYTIME SOON

My blog of April 17 was entitled "Let the excitement begin" and we are still waiting two weeks later but the waiting could soon be over. I want to take you straight to the daily chart of the Dow and you will notice levels at 18175.5 and 17917.3 which have been highlighted because on or other is going to give way and allow a rise to +-18500 to encounter the overhead resistance line or else drop very sharply to test the October low at 15855.7. Which way?

USD/CNY HAS POTENTIAL TO DECLINE

Everyman and his dog is supposedly long the USD but there have been some warnings that there is no one left to buy and that the dollar should drop back. If you take that view then it is possible that the dollar could weaken first against Chinese yuan or renminbi.

LET THE EXCITEMENT BEGIN

Earlier this month I wrote that VIX was pointing to the onset of excitement but nothing has happened until now. Check out the chart of the VIX and S&P500 which shows that they are both being squeezed into their respective corners ...it looks like today there is going to be an attempt to break out. It looks like VIX should go up and and equities down. So risk could come off with a bang...just watch the levels...if the S&P500 takes out 2097 expect the onset of fear but in the unlikely event of it rising through 2112 we could see "investors" piling in.