In This Edition: This month’s report begins by updating the US$ dollar index position. It comes at a critical time when the dollar is holding just above major support – should the recent downswing post July’s Federal Reserve high continue, it would confirm 2018’s corrective 2nd wave upswing has ended. That would be good news for U.S. President Trump who’s accused China and Europe of currency manipulation. But what impact would a new sustained downtrend have for commodities? The historical negative-correlation would suggest prices would rise, right? – hmm, not this time, at least not in the immediate future! There’s a more significant driver impacting commodities and that’s the continuation of the U.S./China trade dispute which is threatening to drag global economic growth and of course consumption lower. Key commodities like Copper have been engaged in counter-trend 2nd wave downswings since the beginning of 2018 which inversely matches what the US$ dollar’s been doing. This month’s report updates its pattern development alongside Aluminium, Lead, Zinc and Nickel. The report examines correlations, fib-price-ratio targets and cycles.
Growing expectations of a U.S. recession basis the inversion of the dollar yield-curve has unleashed several investment analyst notes that now expect an interest rate cutting cycle to begin by the Federal Reserve. Danske Bank analysts are predicting the Fed will respond to a weakening U.S. economy with up to five more -0.25% cuts over the next year. A similar theme was echoed by analysts at Saxo Bank – they predict a -0.50% cut for the remainder of this year and even a continuation through next year, 2020. That seems unrealistic from an Elliott Wave perspective – why? – because this is simply a corrective pause within the 2nd phase of the ‘’ uptrend that began from the 2016 lows. Don’t forget that Feb.’16 marked the end of a hefty stock market correction and the end to a five-year commodity correction that began from the 2011 highs. This pause is already 18-months long – another 6-months and it’s done!
This month’s report has some fascinating forecasts for precious metals – it’s certainly not consensus basis the overwhelmingly bullish analyst notes that have been published over the last month. Did you know that the latest COT net-speculative long-positioning for Gold is at 3-year highs? Bullish sentiment is at extremes and that applies to Silver, Platinum and even Palladium, all of which are updated.
Crude/Brent oil had a strong positive-correlation with U.S. stock markets last year – the October ’18 peaks resulted in a synchronised decline into dual lows last December. Even the following rallies peaked within a few weeks with each other prior to stock market declines. Although Crude/Brent have since declined too, losses are comparatively small. Are they set to catch up with downside acceleration over the coming months or are divergences heralding something else. This month’s report takes a look at both contracts + updating Crude Oil’s composite cycle which reveals direction into year-end.
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