The USD Index gave up its Tuesday's gains earlier today, which is consistent with the back-and-forth trading prior to the start of its next serious move. We're ready and the charts are sending us an important message that warrants making a new trading decision right now.
Meanwhile in oil, we have again seen an uneventful session yesterday if judged by the opening and closing prices only. But it's about the context these moves are playing out in. Its message is clear, and the earlier confirming sign just got one more ally. Let's dive into the charts and find out what it means for our profitable open position.
As you've read in the previous Oil Trading Alerts and Forex Trading Alerts, Nadia Simmons, who is the author of these reports has not been feeling well. This remains to be the case, and as it's been several days since you received crude oil or forex analysis from us, I (PR here) would like to help.
Consequently, I will be writing analyses of both: crude oil and the forex market and I will publish them combined, so that those, who normally enjoy access to only one of these reports, will get something extra. That's not much of a positive surprise for those, who already have access to both Alerts (for instance through the All-Inclusive Package), so if you have access through this package or you subscribed to both products individually, I will provide you with something extra. I will analyze any company of your choice with regard to its individual technical situation, and I will send you this on-demand analysis over e-mail. If this applies to you, please contact us with the name of the company that you're interested in.
Having said that, let's take a look at the crude oil market.
Crude Oil Analysis
Today's analysis is once again going to be short as practically nothing changed with regard to the crude oil outlook, and the only thing that actually changed, confirmed the bullish case for the next several days. In other words, the profits on the long positions are likely to grow further before we close it.
Let's examine the most recent developments.
Crude oil declined earlier today, but it recovered, erasing the entire overnight decline and has now moved even a bit above yesterday's close. The decline was most likely a form of verification of the breakout above the declining resistance line that's based on the September and early-October closing prices. In Tuesday's analysis, we warned you that crude oil might test the breakout above the resistance line by declining a bit, but overall the upside potential for this trade remains intact. That's exactly what happened and the upside potential for this trade does indeed remain intact.
The breakout is now fully confirmed, so crude oil is likely to rally.
Consequently, our upside target of about $56 remains intact - it's based on the 38.2% Fibonacci retracement level and the likelihood of a rebound to the previously broken support line. This line is visible on the below medium-term chart.
The rising green line is very close to the $56 level. That's above the 50-day moving average, but let's keep in mind that this moving average has rarely stopped the previous rallies. Instead, it was usually insignificantly broken to the upside before the short-term rallies ended. We saw that multiple times in August.
The buy signal from the Stochastic indicator is now clear and thus we expect more traders to join the long side, contributing to higher crude oil prices in the near term.
The CCI moved above the -100 level which often corresponded with local rallies in the past. That's yet another reason to expect higher crude oil prices in the near term.
Consequently, in our view, the current long position is justified from the risk-reward point of view.
Trading position: Long position in crude oil with a stop-loss order at $49.88 and the binding profit-take target at $55.88 is justified from the risk/reward perspective.
Forex Analysis
As far as the currency market is concerned, Nadia usually covers the individual currency pairs. However, that's not what I specialize in, so instead of the usual format of these analyses, I will maximize their usefulness and likely profitability. This means that instead of focusing on individual currency pairs, I will cover the USD Index, as that's what I've been following on a regular basis for years.
It's also tradable, as there are futures on it (DX symbol) as well as ETFs, for instance the UUP and the UDN.
In short, placing new long position orders in the USD Index is justified in our view.
Let's start with the short-term USDX chart and a quote from yesterday's analysis:
The USD Index moved higher, so you might be wondering if we missed the best buying opportunity. This might be the case, but let's keep in mind that the current upswing is still in tune with the size of the back and forth movement that we saw in the second half of September. Consequently, yesterday's upswing might be just a small bounce and not the beginning of the next upswing. Another test of the October lows appears likely before the USDX truly takes off. After all, history tends to repeat itself and that's how the August and September rallies started.
As today's pre-market trading shows, we were right about the likelihood of the back-and-forth movement.
The USD Index is declining and at the moment of writing these words, it's trading close to the October lows in terms of the daily closing prices. The rising support line is not that close, but it's not very far either. It's currently close to the intraday October low in the U.S. currency. Both levels confirm each other as support and it appears likely that the next rally in the USDX will start from this level. Consequently, new long positions will be justified from the risk to reward point of view once the USDX declines a bit more.
Why are we focusing on the long positions in the USD Index? Because of the long-term trend, which remains up.
Our previous comments on the long-term charts remain up-to-date:
The USD Index is after a major long-term breakout and this breakout was already verified a few times. The most recent rally is just the very early part of the post-breakout rally. Much higher USD Index values are likely to follow in the upcoming months.
The long-term trend is up as even the dovish U-turn by the Fed, rate cuts, and myriads of calls from President Trump for lower U.S. dollar and much lower (even negative) interest rates, were not able to trigger any serious decline.
What we saw instead was a running correction that's the most bullish kind of corrections. It's the one in which the price continues to rally, only at significantly smaller pace.
Trading position (short-term; our opinion): Long position in the USD Index with the entry price of 98.35, a stop-loss order at 97.27 and the binding profit-take target at 99.17 is justified from the risk/reward perspective.
Alternatively, you may want to enter a different, more long-term oriented position with a different profit-take order that we feature below. The former (upper) position aims to benefit on the short-term trade, while the latter (lower) position suits the medium-term trade. The Forex Trading Alerts usually focus on the short-term trades, so the odds are that the former trade will be more aligned with your preferences. Still, if you have a more medium- or long-term approach, the latter position should be more useful. For the purpose of clarity, we will follow-up with the former position in the following Forex Trading Alerts.
Trading position (medium-term; our opinion): Long position in the USD Index with the entry price of 98.35, a stop-loss order at 97.27 and the binding profit-take target at 102.47 is justified from the risk/reward perspective.
As always, we will keep you - our subscribers - informed.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
