Latest news with #USDIndex
Wall Street Journal
22-05-2025
- Business
- Wall Street Journal
Asian Currencies Consolidate as Traders Assess Risks of Rising U.S. Deficits
0043 GMT — Asian currencies consolidate against the dollar in the early session as traders assess risks of rising U.S. deficits exacerbated by a weak 20-year Treasury auction overnight. 'Concern about impending U.S. tax cuts against the backdrop of already high government debt has pushed up Treasury yields and weighed on USD this week,' CBA's Kristina Clifton says in a research report. However, 'the lack of serious alternatives to the U.S.'s deep and liquid debt market will put a floor under U.S. bonds and the USD in the near term,' the senior economist and senior currency strategist adds. ICE USD Index is steady at 99.56; USD/KRW edges 0.2% higher to 1,377.14; USD/JPY is down 0.2% at 143.38. (
Globe and Mail
19-05-2025
- Business
- Globe and Mail
What 3 Key ‘Outside' Commodity Markets Are Telling Us About Grains Prices This Week
Grain futures market prices are impacted daily and on a longer-term basis by how a select number of other important commodity markets are behaving. Let's look at three key 'outside markets,' their present price postures, and how they relate to corn (ZCN25), soybean (ZSN25), wheat (ZWN25) (KEN25), and oats (ZON25) futures. U.S. Dollar Index Bulls Working on a Price Uptrend The U.S. Dollar Index ($DXY) (DXM25) is a basket of six major global currencies weighted against the greenback. It's an important market for grain traders because most grain traded on world markets is priced in U.S. dollars. The USDX had been trending down from January to late April. That meant U.S. grains were less expensive to purchase on the world markets, in non-U.S. currency. However, present near-term chart posture for the USDX has turned bearish for grains. The USDX is presently in a price uptrend on the daily chart and prices last week hit a four-week high. If the USDX continues to trend higher, the upside potential for grain futures markets may be limited. Resumed and sustained USDX weakness would be bullish for grains. Crude Oil Trading Likely to Turn Choppier and More Sideways June Nymex crude oil futures (CLM25) made a good rebound from the early May low but late last week sputtered after the International Energy Agency lowered its global crude oil demand growth forecast. The lower outlook is due to broad economic uncertainty amid a global tariff war led by the U.S. and China. Also, the U.S. and Iran have been in talks to ease their tensions. The U.S. says Iran must stop its progress toward making a nuclear bomb or suffer dire consequences. The U.S., in turn, would lift economic sanctions on Iran, including its crude oil exports. It appears Iran is heeding the U.S. threat and wants to talk more about the matter. Lifting sanctions on Iranian oil would put significantly more crude oil on the world market. The factors mentioned above suggest less demand and more supply, which is price-bearish for crude oil. It's likely that Nymex and Brent crude oil futures prices will trade only sideways at best in the coming weeks or few months, barring a breakthrough on better global trade relations, which cannot be ruled out. Crude oil is the leader of the raw commodity sector and if crude can't sustain a price uptrend, then other raw commodity markets, including the grains, are also much less likely to do so. Conversely, uptrending crude oil prices would be a significantly bullish element for the grains as well as other commodities. Such could indeed occur in the coming weeks if the U.S. and its major trading counterparts, namely China, continue significantly easing trade tensions. U.S. Stock Indexes Are Rallying and That's Limiting Selling Interest in Grains The major U.S. stock indexes last week hit 2.5-month highs and are trending up. That strongly suggests better trader and investor risk appetite in the general marketplace and that's bullish for commodity markets, including the grains. If the U.S. stock indexes continue to trend higher, then speculative grain market bulls will be more compelled to play the long sides in grain futures. Significant selling pressure in the U.S. stock market would re-energize the grain market bears. My Bias on the Key Outside Markets Is Grain-Markets Bullish If U.S.-China trade relations continue to improve, and I believe they will, that would be stock-market bullish, USDX bullish and crude oil bullish. Trader and investor risk appetite would continue to improve. Given the turmoil in global markets leading up to the recent thawing in U.S.-China trade relations, it sure seems U.S. President Donald Trump and Chinese President Xi Jinping will want to keep the ball rolling on better trade relations. So, two of the three outside markets for grains would be bullish (higher oil and higher U.S. stock indexes), while one would be bearish (higher USDX). In such a scenario, I believe the outcome would be significantly more bullish for grains market futures than bearish.
Globe and Mail
13-05-2025
- Business
- Globe and Mail
What a Slide in Gold! What a Jump in the USDX!
Both are completely unsurprising, as the technical analysis (and common sense) provided insights beforehand. Yes, the U.S. – China dramatic tariff decrease announcement was the direct trigger – the technical writing was on the wall for a long time. This goes in particular for the situation in the USD Index, where the sentiment was particularly negative while it reversed by forming a classic inverse head-and-shoulders pattern and it did so at extremely strong support levels based on long-term 61.8% Fibonacci retracements. However, before moving to charts, let's discuss what's going on from the fundamental point of view. The Dollar-Tariff Dance: How Trade Tensions Reshape Markets The relationship between the US Dollar Index, stock markets, and commodity prices during periods of trade tension follows distinct patterns that experienced investors can leverage for strategic positioning. When the US imposes tariffs, the dollar typically strengthens through reduced import demand and safe-haven capital flows, creating predictable ripple effects across markets. This dollar strength then exerts downward pressure on commodity prices—particularly industrial metals like copper—through decreased global purchasing power and financial market dynamics. How tariffs strengthen the greenback Trade disputes consistently drive dollar appreciation through multiple reinforcing channels. During the 2018-2020 US-China trade war, the Dollar Index strengthened from approximately 90 to 98—an 8-9% appreciation—as tariffs escalated from 3.8% to 19.3% on Chinese imports. The relationship operates through three primary mechanisms: Demand channel: Tariffs reduce US demand for imports, decreasing the need for foreign currencies to purchase those goods. This creates direct upward pressure on the dollar as fewer dollars are exchanged for foreign currencies. Capital flow channel: Trade tensions trigger global uncertainty that drives safe-haven capital flows into dollar-denominated assets. During the 2018-2019 escalation phase, the DXY index increased approximately 2% when tariffs rose from 10% to 25% on $200 billion of Chinese goods. Interest rate differential channel: If tariffs generate inflationary pressures domestically, central banks may respond with tighter monetary policy. Research from economist Stephen Miran suggests a 10% change in tariffs theoretically leads to approximately 4% dollar appreciation, though retaliatory tariffs can diminish this effect. When the dollar rises, copper falls Statistical evidence confirms a consistent negative correlation between dollar strength and commodity prices, particularly for industrial metals like copper: Please take a look at the key tops in copper that I marked with orange, vertical lines. In each case this was a major, medium-term bottom in the USD Index it was still relatively close to it (ahead of a powerful rally). This was true also for the 2018 top in copper (bottom in the USDX) that I didn't mark on the chart. This inverse relationship operates through several mechanisms: Purchasing power effect: When the dollar strengthens, commodities become more expensive in non-dollar currencies, reducing global demand and pressuring dollar-denominated prices downward. Production cost effect: For commodities produced outside the US but priced in dollars, a stronger dollar means producers receive more in their local currency per unit sold, potentially incentivizing increased production and lowering prices. China factor: As the world's largest copper consumer, China's purchasing behavior significantly impacts prices. Dollar strength against the Chinese renminbi directly affects Chinese copper demand, as imports become more expensive. During the early 2018 tariff announcements, copper prices declined by approximately 15-20% as the dollar strengthened, demonstrating this relationship in practice. Why stock rallies after trade deals fizzle Market data reveals that stock rallies following trade deal announcements often prove short-lived despite initial optimism. This pattern was evident in the 2018-2020 US-China negotiations and is likely about to repeat itself based on the current agreement to reduce tariffs. Economic theory explains this phenomenon through three distinct mechanisms: Information asymmetry resolution: Trade deals initially resolve uncertainty, triggering market rallies. However, as investors process the detailed implications and implementation challenges, initial enthusiasm gives way to more nuanced assessment. Discount rate vs. cash flow effects: Announcements temporarily reduce the risk premium (discount rate), causing immediate price increases. However, if actual cash flow benefits prove more modest than anticipated, prices subsequently adjust downward. Tariff persistence effects: Even reduced tariffs continue to disrupt supply chains and global trade. Soon after the May 2025 US-China agreement, Flexport CEO Ryan Petersen noted that even with tariffs reduced to 30%, significant trade disruption would persist after the previous 145% rate had caused shipments from China to plunge 60%. Why tariffs remain headwinds even at reduced levels Economic theory explains why tariffs create persistent headwinds for global trade and stock markets even when reduced: Price distortions: Tariffs create wedges between domestic and global prices, leading to inefficient resource allocation. Research shows that even modest tariffs of 5-10% can significantly alter trade flows. Supply chain disruption: Modern production relies on complex global supply chains. Tariffs force costly adjustments to these arrangements with effects that persist long after tariff reductions. Uncertainty effects: The policy uncertainty created by tariff regimes deters business investment and expands trade costs. A study from Yale's Budget Lab estimated that the 2025 tariff escalation reduced GDP growth by 0.9 percentage points, an effect that will only partially reverse with the recent reduction. Global transmission channels: Dollar strength impacts global trade through financial channels (tightening conditions due to dollar-denominated debt worldwide), trade financing effects (increasing local currency costs), and liquidity effects (constraining economic activity particularly in emerging markets). Research from the Bank for International Settlements concludes that global trade activity is strong when the dollar is weak but suffers when the dollar is strong. This pattern has remained remarkably consistent even during major economic disruptions. Fundamental Conclusion The interrelationships between tariffs, dollar strength, commodity prices, and stock markets form a predictable pattern that investors can leverage for strategic positioning. While tariff reductions like the recent US-China agreement provide immediate market relief (an emotional one in particular), historical evidence and economic theory suggest caution about sustained market optimism. The 30% residual tariffs will continue to distort trade flows, maintain upward pressure on the dollar, and exert downward pressure on commodity prices. The rally in stocks is also like to be temporary. Technically Speaking The USD Index soared. The breakout above the declining resistance line is crystal-clear, and so is the invalidation of the move below the 2023 and 2024 lows. This is as bullish as it gets, especially that this perfectly fits the bullish set-up from USD Index's long-term chart. Quoting my previous comments on the above charts: 'On a short-term basis, we see that the USDX is on the verge of breaking above its steep, declining resistance line. At the same time, a rally above this line will also take the USD back above its last year's lows, thus invalidating the breakdown. This is the most likely way forward, and when it happens, it will become clear to many market participants that the trend has reversed. That's when the declines in the precious metals market will become much bigger.' Today's breakout in the USD Index has indeed made it clear, and the decline in gold is also quite sizable, as gold price is down by over $100 dollars this week, even though the markets have yet to open in the U.S. Some people might be using this moment to buy more for their retirement accounts, while other will likely wait for even lower prices. Gold's slide took it back to its early-Maybe lows and well below the rising support line based on it and the April low. I told my subscribers that the pre-FOMC rally was likely very temporary and something that's about to be reversed and that's exactly what happened. What's next? Just as the rally in the USD Index is just getting started (it's obvious based on USD Index's long-term chart), the opposite is the case for gold, silver, and mining stocks. Declines in them are just getting started. It seems that there's just one thing preventing the decline to accelerate – the strength in the stock market. The S&P 500 Index soared based on the news. It turned out that my recently bearish comments on stocks were wrong, while Paul Rejczak's bullish ones (his Volatility Breakout System flashed a buy signal for stocks some time ago) were correct. Well, we did profit on the easy part of the rebound, though, which was my deliberate decision. I'm stepping out (with regard to describing trades) of the key area of my expertise only when I see something superb – just like (it does indeed usually yield great results) I now see it in copper (and copper stocks). So anyway, what does the above tell us? Two things. One is that – similarly to what we saw in copper – the rally in stocks is not as big as the slide that we saw in April when the tariffs were announced, which suggests that the market might be waking up to the reality that tariffs will be ultimately negative for the world economies, including the U.S. economy. The other is that since the current move is unlikely to last based on the fundamental situation, we should be on the lookout for factors confirming or invalidating this. What we see above is that stocks moved slightly above their late-March high as well as the (not that popular, but still important) 78.6% Fibonacci retracement level. This means that a move back below those levels and a close below them would be an invalidation and a sell signal. Will we see something like that? This is quite likely given copper's triangle-vertex-based reversal (covered in the full version of the analysis – today's Gold Trading Alert) that's due today. Copper and stocks have been moving in sync recently, so a top in copper would likely correspond to a top in stocks. Now, since the stock market is likely the thing that's keeping many other markets up despite dollar's strength (like silver, and mining stocks), the above-mentioned declines in stocks, would likely pull the trigger on the declines also in the other markets. Thank you for reading the above free analysis. If you'd like to access my complete premium analysis, including specific technical targets for FCX (even options) and silver, detailed analysis of mining stocks, and comprehensive portfolio insights, consider subscribing to my Gold Trading Alerts or – if you want the best – our Diamond Package. If you're not ready to subscribe yet, I invite you to stay updated with our free analyses - sign up for our free gold newsletter now. Thank you. Przemyslaw K. Radomski, CFA Founder, Editor-in-chief
Globe and Mail
05-05-2025
- Business
- Globe and Mail
Lessons for Gold Investors from USDX, Bitcoin and Gold Stocks
The markets are relatively calm today, but don't let that fool you. They are about to MOVE. There are multiple clues as for the way in which the markets are likely to move next, and I'm going to discuss three of them in today's free analysis. One of them is about the USD Index, the other is about bitcoin, and the final one is about the analogy in the gold stocks to gold ratio. Let's start with the former. I previously elaborated on how the previous lows were likely to stop USD Index's decline, and that's what happened. Despite the initial move below the 2023 low, the USD Index moved back up, forming a strong weekly reversal, which is a bullish signal of medium-term importance. The thing that I'd like to add today is that from the very short-term point of view, we also see that the USD Index is about to rally. The above chart features the 30-minute candlesticks and based on them it's clear that the USD Index has been forming an inverse head-and-shoulders bottom pattern for two weeks now. As the trading becomes narrower, it seems that we're about to get a breakout any hour now. This patten along should be enough to trigger a rally to at least 101.5. This, in turn, would confirm the bottom from the long-term point of view, and likely lead to further gains in the following weeks. The opposite would be likely in commodities and in the precious metals sector. Now, as far as bitcoin is concerned, I'd like to point your attention to a specific analogy between now and 2022. Price patterns in bitcoin, and the way gold, silver, and mining stocks reacted are very similar in both cases. Bitcoin formed its final top, declined and corrected in both cases with more or less the same price action in the precious metals sector. Namely, bitcoin's initial decline and the correction triggered rallies in the PMs and miners. Perhaps the investors that sold bitcoin initially simply switched to the other sector instead of holding cash. That would make sense, as both are viewed as anti-dollar assets. Still, after the corrective upswing was over, both: bitcoin and precious metals declined together. This is likely where we are right now – on the verge of that decline. And yes, even the time of the year is almost identical. On the bottom of the above chart, you can see what happened to the price of FCX, my top shorting candidate – it collapsed, and was cut in half in just a few months. It looks like we might reap profits on it once again. So, we are very well positioned even in light of the analogy to the crypto market. Finally, let's take a look at the gold stocks (HUI Index) to gold ratio. Gold miners' revenue and therefore profits depend on gold prices. There are also other considerations and cost factors, but in general, the higher the gold price, the better profits for miners should be – and thus their shares should trade higher. The problem is that this isn't really the case. Gold stocks were outperforming gold between 2000 and 2004, and then they stopped until 2008. From that point onwards they have been either underperforming gold on a medium-term basis (between 2008 and early 2016) or not doing much (between 2016 and now). Many people have been calling this to be a massive buying opportunity, but until we see a breakout above the declining long-term resistance line, this is simply NOT the case. Ok, one – great – alternative scenario would be that we'd see a big decline in the entire precious metals sector, especially in the mining stocks. This would create a massive buying opportunity in the miners, which tend to perform particularly well in the first part of the rally – we saw that in early 2016. In fact, this is exactly what we are likely to see in the following months. See that spike-like decline in 2008? That's what I see as the likely outcome in the following months. The main reason why I'm sharing this chart today, it to show you that despite the recent run-up in the miners, they are not really strong relative to gold, except on a very short-term basis (which might be related to people getting out of bitcoin – but as I explained earlier, this is likely a temporary effect as both are likely to decline shortly). In consequence, this is very likely NOT a get-away rally in the miners. It's the opposite – the final part of a rally before big declines. Gold already broke its parabola, so all the above simply serve as confirmations of the end of the rally. All this creates several opportunities to benefit from the upcoming price slides. I wouldn't short gold here (due to it's safe-haven potential and geopolitical uncertainty), but there are parts of the market that are poised to decline more than the rest that currently present excellent opportunities to those willing to go against the crowd. Thank you for reading the above free analysis. If you'd like to access my complete premium analysis, including specific technical targets for FCX (even options) and silver, detailed analysis of mining stocks, and comprehensive portfolio insights, consider subscribing to my Gold Trading Alerts. If you're not ready to subscribe yet, I invite you to stay updated with our free analyses - sign up for our free gold newsletter now. Thank you.
Globe and Mail
05-05-2025
- Business
- Globe and Mail
Gold, Miners, Commodity Investors: Watch Out for Those Reversals!
The U.S. nonfarm payroll statistics were just released. They were better than expected, but overall well within the previous range of values – nothing to write home about. Markets' reaction was relatively small and in perfect tune with the technical patterns that I had already described previously. Gold price corrected a bit after breaking below the previous intraday lows. This consolidation is normal, and it's unlikely to result in any meaningful rebound as no major support level was reached (except for the early April high which was almost reached). Everything that I wrote about gold price forecast for May 2025 remains up-to-date. More importantly, however, the USD Index (to the rally of which gold reacted by sliding) didn't encounter any particular resistance level. In fact, it seems that after the current pullback its price will rally once again. This pullback is completely natural, as the USDX just completed its inverse head-and-shoulders pattern. Corrections after those are common. And since the USDX just bottomed very close to the triangle-vertex-based reversal, it seems that the bottom here is in or about to be in. This, in turn suggests that the corrective upswing in gold and silver is about to be over. The same is likely for the stock market, which is likely also connected to the reversal in the USD Index, but in stocks' case, there's more to that. As I explained yesterday, the stock market has its own triangle-vertex-based reversal point due early next week. Consequently, the current pause after a rally is quite natural. We're still likely to get a (likely big) move lower next week. Besides, the decline in copper already indicated what's likely next for stocks – it moves quite closely with the S&P 500, and it already declined significantly this week. The invalidation of the move above the 61.8% and 50% Fibonacci retracement levels along with copper's strong tendency to form major tops in early May strongly favors big declines in the following weeks. Those, who don't know about this tendency might believe copper's rebound or even FCX's (or other copper stocks' strength) here. But you know that it's all fake. It's a gimmick. A final shakeout of those making emotional purchase decisions. In the previous weeks, I wrote a lot about the links between now and 2008. While the history rhymes instead of being repeated to the letter, but sometimes the market does repeat its performance on important anniversaries. And please note that the final top in copper in 2008 was formed on May 5. If this was to be repeated, we'd be looking for the final top to take place on the next trading session – on Monday. This would be in perfect tune with stock market's triangle-vertex-based reversal and with the fact that the USD Index is likely to rally shortly. Meanwhile, mining stocks provided us with a huge 'things are changing' signal of their own. Namely, the GDXJ just closed below the highest close of 2020! This is a major invalidation and a clear sell signal. Quoting my yesterday's comments: 'This is significant, because the highest daily close of 2020 was $59.58. This means, that GDXJ could invalidate the breakout above this high in terms of daily closing prices as early as today. The lowest weekly close of 2020 was $56.69, so if we were to get this week's close below that, the invalidation would be perfect. And that's exactly what we're likely to get – if not this week, then in the next of the following weeks. Given gold's momentum, and – most importantly – USD Index's likely final bottom, it seems that we won't have to wait long for this invalidation. And the invalidation itself would serve as a gateway to much lower prices in the following weeks. My best bet right now is that we'll get the above-mentioned invalidation in terms of the weekly closing prices next week. The reason is the situation on the stock market.' Thank you for reading the above free analysis. If you'd like to access my complete premium analysis, including specific technical targets for FCX (even options) and silver, detailed analysis of mining stocks, and comprehensive portfolio insights, consider subscribing to my Gold Trading Alerts or – if you want the best – our Diamond Package. If you're not ready to subscribe yet, I invite you to stay updated with our free analyses - sign up for our free gold newsletter now. Thank you.
