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Trade of the Week LONG DOW (see page 3).


donaldprice

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TRADE OF THE WEEK GOLD NOW FINISHED)

Seems like Gold is on. Despite the dollar sell of. Yen remains intact in its path despite the DX tantrum. Because of the FED rates coming up gold without doubt remain under pressure. Fresnillo is also a great alternative trade as well, can do both of course.

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Although Gold may just continue its bearish trend especially if the FED raises rates, but once Yellen is out of the way, i do not think that we will stay in this bear market, now of course this is a medium term analysis, however with a lot of uncertainty with TRUMP and EU elections, i do think gold will break out of this bear trend, therefore for i would watch for a rising trend and not making lower lows and a soldiers march penetrating the red descending trend line.

Chart below.

 



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EUR-USD TRADE OF THE WEEK.

Last time the fed raised rates the price of a rate rise was priced in back on 16-12-15. Very similar thing now. The move was followed soon after by a depreciation in the DX and appreciation of the EURO. Now although everyone is talking about parity, because the price is already in, unless the fed states they will be anouncing several other rate rises in near future like last time based on good economic data etc, etc, then parity will be inevitable. However it is possible that we may see not long after a bit of a bounce in the EURO, but from a technical view this will probably be not like the last time and here is why. We have upcoming election in the eurozone France and Germany and of course the ongoing issues with the Italian banking system. Therefore best look for a decent entry in the smaller time frames 



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So right .  All big levels are tough to crack, any breakout needs follow through and so same with Dow Jones 20,000. Never jump straight in on a breakout (buying the high, selling the low) - after breakout always wait for the first attempt to reverse to fail, so becoming just a pullback (often back close to the breakout level) and a signal for the many to jump aboard, far greater chance of success.

Don't worry about drawing futuristic arrows on the chart, these should not be considered predictions but just what you would need to see price action do before you would consider an entry.

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True Casey, i have been scalping this most of yesterday and today on bullish momentum trades. I do think that this dollar bullishness is going over the top slightly, but that does not mean the market does not continue on the delusional trajectory which is why its best not to question logic just stick to the price action, but since Trump has not come in yet and fiscal policies not been even started then we must watch US inflation as this will be the key driver to further bulliness in the dollar.  

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Looking at EURO DOLLAR we have seen a nice stage comeback, however since the overall trend is down and since the DXY is an the inverse correlation its is important to assess that are we now going to see a deeper retracement or will be very soon continue on the bearish trajectory and if so for how long. Next week we have some really interesting data out on Wednesday the 4th of January for EU inflation of which is forecasted to be 1%, up from 0.6%. We also have the ADP US employment report forecasted to be 173K down from 216K, therefore you can see how the EURO and the DXY could react. Because Trump is going to attempt is mass fiscal stimulus and add to the debt burden this will in theory make the euro zone much more competitive due to a weaker currency. Many try and compare Trump to the era of Reagan during the 80's and how the past positive impact could be repeated. Their is a big difference however and that the US economy is doing fine at present and inflation is rising, under Reagan the opposite occurred inflation came down further after Carter left office. The danger is if inflation starts rising steeply this will force to fed to raise rates faster causing further speculative bullish bets on the dollar which will make the US much less competitive and China and Europe will have a greater competitive edge. 

From medium term stand point we also do have the Dutch, French and German elections. And today Obama is looking at sanctions in Russia over internet hacking and the Nov elections. I would not put it past them that Russia may try perform the same tactics again, especially in France where they can do the most damage. If Le-pen was to win then the EURO would be finished tomorrow morning, but of course this is no more that pure speculation and role of the dice. 

From a technical standpoint for € $ i will be watching how price action reacts to the hourly resistance trend line and of course DXY. We must also be mindful of gold as this also is correlated heavily with the dollar unless of course political uncertainty occurs then both can potentially rally. 

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FTSE100 TRADE OF THE WEEK

For the FTSE100, although their could be some drama at the ECB on the 19th of January. The sectors i will be watching will be oil and gas, house hold and goods, healthcare and banks as these have >10% weight on the FTSE100. Watching the EIA inventories as well since OPEC is supposed to be start cutting output will be crucial for the FTSE100. Therefore it will be a mixed picture has you will have different sector performances. But those 4 heavyweights will be key to help determine direction of travel. I do think watching the dollar index is key since the FTSE100 companies get their earnings in dollars if the dxy weakens in the short-term then this could add further pressure.

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From a technical stand point, FTSE100 currently trading in a channel, if this is a Truncated Wave 5 then you would look for a good downside ABC which would have to last several weeks as most retracements do. We also do have some significant divergence on the 4hourly and less amount of volume to the up side. 

 

 

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USD CAD has finally broken trend-line support with immediate horizontal support at 130 area. If the dollar continues to sell of and oil rallies you are going to have the perfect recipe for the Canadian dollar to strengthen even greater. Trump wont want a strong dollar as this will make exports much less competitive, how he can stop it is another matter of course. Watch out for PPiI inflation friday this could be what reverses the current bearish trend. 

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  • 2 weeks later...

For gold and Aud usd they both have a positive correlation and gold of course has an inverse correlation with DXY. But looking at gold immediate daily resistance which daily shows much clearer picture and minimal noise suggests that the 1248 level is a strong resistance which a good fib level.

Now 2 main factors would fundamentally drive this is: a weaker dollar or negative investment sentiment or political uncertainty. Trump is without doubt going to try and talk down the dollar, i cannot see the US all of a sudden start buying foreign FX and he may not be even able to prevent this.

But logically speaking he will not have a competitive edge of places like Europe or China if they have a weaker currency. Therefore political or trade tensions are only going to be bullish implications for Gold. But like Brexit both gold and dollar rallied together and this represents an extreme fear factor.

Therefore if i was to go long on this has J-Mahony points out the 1195 level is a very logical area to place a stop loss has this then would clearly invalidate it. 

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Gold looking edgy this morning must watch oyt for the 1195 level a break below this level could try and target the 1187-1181 level. Best keep an eye on treasuries as well as that to is currently got some support, how long it will last will depend on buyers taking control or at least hold the market level. Both looking dangerously bearish.

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EURO DOLLAR could be setting up itself for next weeks NFP. It appears that some sort of rising wedge is occurring at present, but many hurdles to tackle at the moment. In order to really know if we are resuming the trend down we would have to see a break at the 10654 level on euro dollar. Fundamentally US data is what will drive this. But as a guide will all this DXY is the one to watch, but also along with gold, of which both Gold and EUR have found good support, for now of course.

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Reviewing trade of the week for euro dollar the lesson to be learned is that the fundamentals driving this where starting: CFTC data showed a shrinking of dollar bull positioning. Trump team stating how the dollar is effecting them, a drop in GDP us growth, interest rates where expected to stay the same and finally today's NFP although US created higher jobs as stated before average hourly earnings are now very crucial to watch. 

I only trade a set amount of markets mainly FTSE & dollar pairs mostly aud & euro $. The DXY and Gold are my primary indicators since if the dollar goes up then euro and aud must come down. Therefore until the dollar stops falling best keeping buying the euro. 

Now over the long-term Trumps policies are by definition dollar positive, therefore having a weaker dollar is not feasible.

Talking down the dollar has worked so far but this will eventually end. Just look at earlier in January 2016 Japan cut rates, increased QE and constant threats about intervening, the market did not listen and instead took on the BOJ. This is not the first time has happened neither will it be the last. Of course their are other ways such as buying foreign assets, coordinated FX intervention or even some of his protectionist policies. Regardless he wont make America great again unless he gets the dollar weaker. 

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The Dow seems to be an interesting chart although i dont really trade the dow more of an indicator for me, it is regardless an interesting measurement of equity performance of the top 30 companies. Since their is talk of DODD frank being relaxed this of course is going to benefit banks namely JPM and GS who control 10% weight together on the index. This could therefore fuel the rally. Goldman sacks is also about to touch its 2007-8 all time highs. However failure to surpass this level could result in significant retrace of the index.

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