-Dollar surges as bonds and gold plunge
-The Dollar is on the verge of a breakout and trend reversal
-Gold moves into corrective mode
-Extended channel defines downtrend in oil
-Bonds remain in overall uptrend despite last week's plunge
-Inter-market charts updated
Dollar*********************************************************
The US Dollar Index ($USD) firmed early in the week and then surged above 75.5 with a big move on Friday. A surprisingly small decline in non-farm payrolls spurred the bulls into action. Notice that short-term, and long-term, rates surged as well. With Friday's big move, the US Dollar Index ($USD) is on the verge of breaking resistance at 76 and RSI is challenging momentum resistance at 50-55. Follow through would reverse the downtrend that has been in place since March. With so many shorts and Dollar bears, we could see a little buying stampede push the index to resistance around 77.5 before a pullback. This would likely weigh on gold, commodities and the stock market.
Gold*********************************************************
With the Dollar surging, the Gold-Continuous Futures ($GOLD) plunged over 3.5% on Friday. Gold was up over 20% since October 28th and up over 30% since mid August. The move over the last 5-6 weeks was straight up and getting out of hand. Sharp advances often lead to even sharper pullbacks. The Fibonacci Retracements Tool shows the 38% retracement around 1100 and the 50% retracement around 1075. These are the first levels to watch for support and a potential bounce.
Oil*********************************************************
Even though the seven week decline in West Texas Intermediate ($WTIC) could be corrective, I am labeling the trend as down until there is a breakout at 80. There is still support around 75 from broken resistance, but oil failed to follow through bounces the last two weeks. With the stock market selling off after the gap on Friday and the Dollar surging, oil could come under pressure.
Bonds*********************************************************
The surprise in non-farm payrolls weighed on the bond market as the 30-year Treasury Bond ($USB) plunged over 1% on Friday. Bonds are very sensitive to changes in short-term interest rates. The better-than-expected employment report shows an improvement in the economy that could eventually put upward pressure on interest rates at the Fed. Even though last week's decline moved back below the breakout point and looks excessive, I remain bullish on bonds and still consider the trend up. Further weakness below key support at 118 would fully reverse the uptrend. Bonds would likely benefit if stocks and commodities weaken.
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The US Dollar Index ($USD) firmed early in the week and then surged above 75.5 with a big move on Friday. A surprisingly small decline in non-farm payrolls spurred the bulls into action. Notice that short-term, and long-term, rates surged as well. With Friday's big move, the US Dollar Index ($USD) is on the verge of breaking resistance at 76 and RSI is challenging momentum resistance at 50-55. Follow through would reverse the downtrend that has been in place since March. With so many shorts and Dollar bears, we could see a little buying stampede push the index to resistance around 77.5 before a pullback. This would likely weigh on gold, commodities and the stock market.
Gold*********************************************************
With the Dollar surging, the Gold-Continuous Futures ($GOLD) plunged over 3.5% on Friday. Gold was up over 20% since October 28th and up over 30% since mid August. The move over the last 5-6 weeks was straight up and getting out of hand. Sharp advances often lead to even sharper pullbacks. The Fibonacci Retracements Tool shows the 38% retracement around 1100 and the 50% retracement around 1075. These are the first levels to watch for support and a potential bounce.
Oil*********************************************************
Even though the seven week decline in West Texas Intermediate ($WTIC) could be corrective, I am labeling the trend as down until there is a breakout at 80. There is still support around 75 from broken resistance, but oil failed to follow through bounces the last two weeks. With the stock market selling off after the gap on Friday and the Dollar surging, oil could come under pressure.
Bonds*********************************************************
The surprise in non-farm payrolls weighed on the bond market as the 30-year Treasury Bond ($USB) plunged over 1% on Friday. Bonds are very sensitive to changes in short-term interest rates. The better-than-expected employment report shows an improvement in the economy that could eventually put upward pressure on interest rates at the Fed. Even though last week's decline moved back below the breakout point and looks excessive, I remain bullish on bonds and still consider the trend up. Further weakness below key support at 118 would fully reverse the uptrend. Bonds would likely benefit if stocks and commodities weaken.
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About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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