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CURRENCY ANALYSIS

Yearend Dollar View Remains Bullish, After a Churning Third Quarter

The disjointed global puzzle still exacerbates failed correlations, but asset rotation ending before yearend 2016

dollar long term analysis Yearend Dollar View, Remains, Bullish, After, Churning, Third Quarter, Currency Analysis, fx trader, forex

During the last three months since our July 2016 medium-term outlook in FX Trader Magazine, the currency and commodity assets have been mostly neutral. The currencies have been in a classic rotation through the cross rates as most of the currencies move sideways. Similarly, most commodities, including Gold and Oil, have been sideways, but for different reasons as we will discuss in this article.

In this article, we will remain focused on the long-term outlook in both sets of assets. We continue to believe that the U.S. Dollar is the lead indicator across the board, although the lag times for each related asset are greatly different and will produce higher volatility turn of the year.

EUR/USD

Yearend Dollar View, Remains, Bullish, After, Churning, Third Quarter, Currency Analysis, fx trader, forex chart-1

After the strong, premature decline to 1.0460 in March 2015 produced weak complex medium-term technical aspects, the continued sideways consolidation beyond our forecast through July 2016 has not impacted the bullish long-term view. Our long-term forecast has continued to stress a top in the EUR/USD since 2009 [at 1.4740], as well as the forecast the subsequent decline to 1.1555 for March 2014. The decline to only 1.0460 [ shy of the .9890 ongoing long-term objective of the last three years], and retest of 1.1715 only dampened bearish long-term momentum for the EUR/USD, but did not terminate the forecast decline. The EUR/USD graphic shows the completion of the forecast correction for January 2016. We are in a prolonged development of the medium-term corrective top in the Euro, still buoyed by the corrective rallies in Oil and Gold [see below]. We continue to forecast a resumption of the decline still to .9890, now three months out to January 2017 from November 2016, We continue as well to forecast a further decline to .9330 strong long-term support out to March 2017 in an even stronger dollar outlook than the previous 5 years. Only a monthly close in EUR/USD still above 1.1715 would dampen the bearish long-term technical aspects of the market, and result in a strong retest of 1.2230 in a higher, choppy outlook [1.0880 - 1.2230] over the subsequent six months.

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