Metals – FX- Indices – update – 2 Feb 2019

Precious Metals: Gold & Silver vs US Dollar, Euro, GBP, Ratio


Gold/USD

We stay fully invested with the Long term trend direction until a clear divergence signal between Risk weight and Price presents itself. Until such time the risk of rapid advance in current uptrend remains high.
(Monthly and Weekly risk and trend are still dominant. No change)

Gold/USD Month Week Day Hour
01 Feb close 1317
(1303)
Trend Direction Up (Up) Up (N) Down (Up) N
Risk Weight 55-70 (35-50) 90-95 (90) 85-95 (35-50) 20
Allocation 100% (100%)

Silver/USD

We stay fully invested with the Long term trend direction until a clear divergence signal between Risk weight and Price presents itself. Until such time the risk of rapid advance in current uptrend remains high.

(No change in position risk. Trend direction and risk weight between LT to MT and ST favor being long)

Silver/USD Month Week Day Hour
01 Feb Close 15.90
(15.70)
Trend Direction Up (Up) Up (Down) Down (Up) Down
Risk Weight 35-50 (15-30) 80-85 (80-85) 80-90 (30-45) 5-10
Allocation 100% (100%)

Gold/EUR

Momentum in LT still favors staying with the advancing price trend. Risk weight however in all time frames is high and ST risk could trigger a short pause and diverge from the MT Weekly risk which is also in high territory.

(Trend and Risk weight still favor full investment in Gold. Eur starting to show some bias towards a short term pause. We keep a check on that)

Gold/EUR Month Week Day Hour
01 Feb Close 1150
(1142)
Trend Direction Up (Up) Up (Up) Down Up) Up
Risk Weight 80-95 (60-80) 90-95 (90-95) 90-95 (60-75) 40-45
Allocation 100% (100%)

Silver/EUR

We stay with the LT uptrend until either MT or ST until a clear signal tell us otherwise.
The 15% price advance since Aug 2018 probably has further to go. No change. Stay fully invested.

(Trend and risk weight favor a low risk fully invested position. Remain fully invested)

Silver/EUR Month Week Day Hour
01 Feb Close 13.85
(13.78)
Trend Direction Up (Up) Up (Down) ~Down (Up) Down
Risk Weight 45-60 (30-40) 80-85 (80-85) 80-90 (35-50) 10-15
Allocation 100% (100%)

Gold/GBP

This pair may pause in a MT trading range between 980 and 1030. For now we prefer to remain with the LT uptrend but keep a watch on other GBP pairs to determine MT risk and LT risk. More price action is required to deviate from current position.

(Relative weakness as indicated last week did materialize. ST weakness and low risk weight points towards short term strength, the extend of which is still hard to predict)

Gold/GBP Month Week Day Hour
01 Feb Close 1005
(990)
Trend Direction Up (Up) Down (Down) Up (Up) Down
Risk Weight 75-85 (60-75) 65-70 (70-85) 65-75 (10-15) 20-30
Allocation 100% (100%)

Silver/GBP

We stay fully invested until clear signal that the LT and MT uptrend shown signs of getting tired. That is not the c ase right now.

(Silver continued marginally weak last week but finished with a strong recovery. No change in being fully invested)

Silver/GBP Month Week Day Hour
01 Feb Close 12.13
(11.92)
Trend Direction Up (Up) Down (Down) Up (Up) N
Risk Weight 30-40 (30-40) 65-75 (65-75) 70-80 (5-15) 85
Allocation 100% (100%)

Gold/Silver Ratio

Gold/Silver ratio travelled in a mere 0.7$ trading range this past week closing virtually unchanged. Current trend direction and risk weight position favors stronger silver. We stay with our 50/50 investment spread.

(Silver is more likely to strengthen against Gold given the risk weight on LT (monthly) and ST (Daily) overruling then Weekly (MT) which is kind of Neutral in a lower risk weight position. From a pure risk perspective we prefer not to increase the silver above 50% in such situation)

AU/AG Ratio Month Week Day Hour
01 Feb Close 82.60
(82.55)
Trend Direction Down (Down) Up (N) N (Down) Down
Risk Weight 65-75 (75-85) 20-30 (20-25) 25 (65-75) 75-85
Allocation 50% AG (50% AG)

FX: EUR/USD, USD/CHF, GBP/USD, GBP/EUR, Bitcoin

Euro/USD

The US$ peaked vs Euro late 2016 en weakened some 20% in the following year. 2018 was relative strong year for the US$ but technically looks like a natural reaction in a current low risk weight freshly established LT uptrend. Long dollars be 100% hedged.

(Euro has difficulty breaking the 1.13-1.15range decisively. Overall risk remains in favor of a weaker USDollar MT. NO change maintaining 100% hedge on long dollar exposures)

EUR/USD Month Week Day Hour
01 Feb Close 1.1455
(1.1400)
Trend Direction Up (Up) Up (Up) Up (Up) Down
Risk Weight 10-20 (10-15) 45-55 (45-50) 65-75 (20-25) 35-45
Allocation 100% (100% hedge)

USD/Swiss franc

Swiss Fr keeps pushing against par resistance. No change to remain fully hedged on long dollar exposures.

(This pair continues in the upper 1/3rd of the broad 0.90-1.05 5 year range. The Monthly higher risk weight and trend direction must now be considered leading risk, hence long dollar exposures fully hedged)

USD/CHF Month Week Day Hour
01 Feb Close 0.9950
(0.9935)
Trend Direction Down (Down) Up (Up) Down (Down) Up
Risk Weight 75-80 (75-80) 40-55 (35-45) 70-75 (80-90) 65-75
Allocation 100% unch

British Pound/USD

GBP weakened 1% last week and stays under influence of Brexit gitters and a rather high risk weight ST picture. The LT picture is bullish on trend and risk weight. MT looks strong still whilst ST now provides more relief for another Cable rally. Stay fully hedned on short cable.

(Cable showed good strength last week. We still recommend a fully hedged short cable exposure)

Cable Month Week Day Hour
01 Feb Close 1.3065
(1.3190)
Trend Direction Up (Up) Up (Up) Down (Up) Down
Risk Weight 10-20 (10-20) 65-80 (50-70) 75-80 (90-100) 45-55
Allocation 100% unch

British Pound/Euro

GBP weakened about 1% against most currencies last week from a relatively high risk weight correlation. The overall technical picture favors a larger allocation to GBP, hence we increase the Short sterling cover to 75% from 50% and reduce short Euro vs GBP to 25%.

(GBP showed good strength last week and now at the to end of last years trading range. Daily risk is high whilst weekly may start to see some price (higher) risk weight (lower) divergence. We continue with 50% hedge either way)

GBP/EUR Month Week Day Hour
01 Feb Close 1.1415
(1.1570)
Trend Direction Up (Up) Up (Up) Down (N) N
Risk Weight 45-60 (50-55) 60-75 (45-65) 65-70 (95) 50
Allocation 75% (50%)

Bitcoin/USD

This largest of crypto currencies appears to be seeking a LT and MT bottom even though it has not finished. This makes this relatively low liquidity play a risky trade. A ST rally may also develop strong divergence with MT which would drive prices lower again and rapidly. We still believe BTC to hit level (well) below 2828 at some point. Hence, not ready to invest in this market but longs may find a better exit from long or even a MT remain in the next few weeks.

(Short term increase in risk weight, albeit modest, without real price change still makes this crypto suspect of further near term weakness. One major factor that can have negative influence on all crypto currencies is the expected 2019 paradigm shift in the use of blockchain technology to tokenize a whole variety of private assets.

Remaining 'opening up' gap still to fill at 2828. We exclude weekend action to determine opening gaps as major players are not participating in size.
If this market is poised to turn from extremely overbought (Dec 2017) to completely oversold, it doesn't appear to be finished.)

BTC/USD Month Week Day Hour
01 Feb Close 3435
(3570)
Trend Direction Down (Down) Down (Down) Up (Up) Up
Risk Weight 0-5 (0-10) 5-10 (10-15) 25-30 (25-30) 55-65
Allocation 0% (0%)

INDEX: US30, S&P500, Dollar Index, Brent crude oil

Dow Jones

We all read the financial news and the hawkish reaction to apparent further QE is understandable. But we do not invest in markets that show relatively high risk or reside in firm LT downtrends, irrespective of the size of the reaction. ST further upward pressure is possible but will more likely end relatively soon as everything from ST to LT points towards the current uptrend being a secondary reaction in a fresh LT downtrend.

(This Index has now recovered 50% of the drop since Sept. However, we see no reason to deviate from our No risk position as initiated last year)

US30 Month Week Day Hour
01 Feb Close 25063
(24737)
Trend Direction Down (Down) Up (Up) Up (Down) Down
Risk Weight 50-65 (50-65) 60-70 (50-60) 85-95 (85-90) 20-30
Allocation 0% (0%)

Standard & Poor 500

S&P confirms the technical picture on the Dow. Stay out!. ST further upward pressure is possible but will more likely end relatively soon as everything from ST to LT points towards the current uptrend being a secondary reaction in a fresh LT downtrend.

(S&P shows the same fundamental higher risk as DJII. Owning this Index simply looks high risk and we do not invest in a broader index under these conditions)

S&P500 Month Week Day Hour
01 Feb Close 2706
(2664)
Trend Direction Down (Down) Up (Up) Up (Down) Down
Risk Weight 45-55 (45-55) 60-70 (45-60) 85-95 (80-85) 30-35
Allocation 0% (0%)

Dollar Index

Dollar talk, War talk, China talk, Interest rate talk. Plenty confusion. Anything can happen ST but LT trend is down and still at high risk weight level and must prevail. Bias is for dollar to show further weakness MT and LT.

(The larger 1% drop reversal last week was largely influenced by strong Sterling. Risk weight and trend continues to favor full hedge on Long dollar exposures)

USDIndex Month Week Day Hour
01 Feb Close 95.60
(95.81)
Trend Direction Down (Down) Down (Down) Down (Down) Up
Risk Weight 80-85 (85-90) 30-40 (45-65) 20-30 (10-20) 75-85
Allocation 100% unch

Crude Oil

LT trend crossed upwards from a medium low risk weight level on Febr 1. The end of month level will determine whether risk has changed to a clear buy. With ST risk pointing towards very possible divergence vis a vis price (lower risk weight / higher price level). We missed the opportunity to invest which technically looked very low risk ST end of December. As the price may increase further this also increases risk of a resumption of the LT downtrend if we see another drop ST and MT. Investing at the current level is technically not an attractive risk.

(The Weekly (MT) and Daily (ST) did show risk weight price divergence around year end and drove a fairly strong countertrend rally. From a pure risk perspective we must follow the continued LT downtrend. We do not invest in Oil until this market shows a serious LT bottom, the level of which has yet to be determined. This could take a long time)

Brent Month Week Day Hour
01 Feb Close 62.90
(61.50)
Trend Direction Up (Down) Up (Up) Up (Down) N
Risk Weight 20-25 (15-35) 35-45 (25-35) 55-70 (70-80) 95
Allocation 0% (0%)

Posted in A - All Financial Blogs | 2020 Forecast.

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