Saturday, October 26, 2013

End October Predictions

Well, most of my doomsday doom and gloom predictions don't come true, so let me try something else.

The US dollar has been so weak lately, but it is currently at a multi year support line. Trend lines are meant to be broken, but just bare with me and my train of thought.

If my predictions are right, the US dollar should be quickly gaining back strength and momentum after pressing lower for maybe a few more days or a week. Once the dollar strengthens, gold will be priced back downwards, and this nicely coincides with its seasonality chart.

The first graph shows that the technical analyst predicted that gold should be breaking out on the triangle that it is in. However, I think that it will rebound and head towards the the $1250 range before taking off for the end of the year.

To me, what this scenario tells me is that commodities will be a good time to buy into for a long position in mid November once the dollar strengths to push down gold prices.

When the dollar strengths, the US indices will feel a pinch and have to head down, we should check if it is confirmed. The indices will be at lows, with dollar at highs, and gold at lows. Gold ought to blast off first, which will weaken the dollar and improve the indices. But, once the indices see the explosion in gold, people might start to panic and the market might collapse. A collapsing market will also bring with it a weaker dollar.

I should be waiting for a nice oversold signal in USD/CHF, and slowly scale in my position once I can see the dollar gaining traction. Once gold hits my target, I should be exiting the fx trade, purchasing my commodities and turn my attention towards the yen crosses. Most likely by this time, we will be at the spot where the USD/JPY is at the top of its triangle too. However, I think that instead of breaking out, it might break down instead due to all the fx carry trade in the yen crosses. If this happens, the indices will be tumbling for sure, and we have to lookout for the fallout and figure which is the trade we want to be on.

Or, this could all be just a load of crap. If the US dollar continues to be crappy, I think the trades to go for is either the EUR, GBP or AUD since they have macro fundamentals to support them. NZD has stately officially that it wants to weaken its currency, while AUD has mentioned the same thing. The pound is overdue for a correction and the EUR is quite lofty, but I can see myself buying into it upwards to the 1.41 range, and then things will get crazy.

Anyway, I think too much for sure, haha.

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