August 12th, 2019. Broader outlook check-in.
US Dollar - valuation inflated, outlook strongly favors sell-short. Cite US Dollar Index at resistance levels last approached in 2015 and 2016. Always resulted in substantial sell-offs taking price down around 5%. Political concerns seem to have caused the US Dollar to staunchly resist bears in December 2018, a hold-out to squeeze short-positions and enhance purchases of USD denominated stocks. Substantially lower lows in 2018 than 2016 suggest aggressive downside potential and that recent bullishness is an artificial result of political/monetary events. Bearish outlook duration extends 3-12 months.
XAU/USD (Gold / US Dollar) - Volatility greatly reduced trending up into resistance in the past 2 hours suggests massive demand considering itâs already cornered into the upside for a full $40 gain on the 30-day chart. This implies future weakness in US stock indexes. With upside limited to $1,600 based on resistance established in 2011-2012 the outlook for XAUUSD is neutral with a likely binary scenario of a sharp sell-off or gradual climb towards $1,600 before pulling back.
USDCNY (US Dollar / Chinese Yuan) - 2016 and 2018 highs being nearly exactly equivalent illustrates management from Peoples Bank Of China. The fact that this level was breached this month on tariff news suggests that artificial USD pumping is a result of lackluster real demand hampering profit taking for USD bulls and that Beijing is participating in favor of prolonging USD bullishness as they are major holders of USD denominations. Outlook suggests to avoid USDCNY exposure as buyer or seller outside of the short-term.
US Treasury Bond and T-Bill Denominations - Anticipated USD denominated stock weakness coupled with reduction in the Federal Reserve bench mark rates suggest highly probable downside in yields. The fact that 1-6 month T-Bills are yielding more than 1-10 year T-Bonds illustrates the monetary climate being highly distorted. Yields have pulled back near 2016 supports. Outlook recommends anticipating range-bound action between below support (1.4%) and below 2017 resistance; i.e. 1.2%-2.0%. Currently 1.7%. Probabilities suggest further downside in yields considering the ferocity in which the Fed is resisting a reversal in US denominated stocks.
Euro - Euro exchange rates are obviously being suppressed across the board versus the majors in the past 2 years, partially due to facilitating artificial pump-priming of USD exchange rates. Upsides becoming sharpened and more substantial in the past year suggest an aggressive reversal is due to take place to correct obvious under-valuation in a 1-2 year outlook. Technically; upside appears to strongly favor gains from current spots in the realm of 5%, possible to be achieved within any 3-month duration based on some catalyst at random yet inevitable time.
EURUSD (Euro / US Dollar) - Downside slope greatly reduced as it nears 2016 resistances from post 2014-2015 crash suggests a sharp reversal is upcoming. 2017-2018 very successful breakout through this resistance level implies 2018 highs around 1.24 (current 1.12) likely to be breached during next rally. Outlook bullish with a 6-24 month duration.
Great British Pound - GBP index very close and under (by a mere 1-3%) 2017 post-Brexit-news lows suggests downside risk is no longer relevant. No-Deal-Brexit has been priced into the market. Political uncertainties will continue to reduce demand until October although there are sharp upside risks as Brexit is completed, thus GBP is due to correct towards the upside in the realm of 15% difference from spot across the board versus majors, but possibly excluding the Euro, partially. This years LIBOR yield pullback after an eccentric run up suggests significant upside with a 1-6 month outlook. Outlook remains extremely bullish with a 6-24 month outlook.
GBPUSD (Great British Pound / US Dollar) - Under repeatedly visited lows from 2016/17 (1.22) by one penny (current quote 1.208) creates a rare opportunity in probability for buyers in the shorter-term. Upside to 1.25 appears extremely probable in a 1-6 month term and likely limited to around 1.30, a very lucrative scenario presented. Outlook extremely bullish with a 1-9 month outlook.
To be continuedâŚ