The WTI Crude Oil $66 level is an area that seems to be offering quite a bit of resistance and now we find ourselves pulling back from there. I think there are a lot of questions out there as to whether or not we are going to see strikes against the Iranians over the weekend. That being said, supply and demand continue to be a major headwind for pricing, so I would not look for massive moves, and I do think fading rallies continue to be the case.
The British pound broke out above the 1.3750 level and have seen a lot of selling pressures to show signs of exhaustion. In fact, the weekly candlestick is a bit of a shooting star. It suggests that we might struggle to continue to the upside. A fall from here could find the British pound dropping to the 1.35 level, which of course is a large round psychologically significant figure. I think part of this is Kevin Warsh being named as the nominee for the new Federal Reserve Chairman, and he is quite a bit more hawkish than many others.
The Euro rallied rather significantly during the week but has been absolutely crushed after initially taking off to the upside. I do think that we are very likely to see the potential for more consolidation. In other words, that breakout might have been false. We will just have to wait and see how the market reacts to the new Federal Reserve Chairman nomination, but as things stand right now, this looks like a market that I think is struggling. The 1.16 level is an area that we could find ourselves reaching towards, but if we turn around and see buyers right away for the next week, then we could see this market really take off, perhaps even heading back towards the 1.20 level followed by the 1.23 level.
The German DAX has been negative most of the week but it is hanging onto the 24,500 level. This is an area that I have been talking about as being important for support as it was previous resistance. All things being equal, this is a market that I think continues to see plenty of interest as we had broken out above there and now it looks like we are perhaps trying to turn things around and rally to the upside. I think the DAX will be one of the better performers this year as the Germans will continue to throw a lot of money into the economy and that should help the DAX, so I am bullish still.
The silver market will be what everybody is talking about as in one week we see it reaches $122 or so and as we are closing out the day on Friday, there is an absolute bloodbath. Silver broke below the $90 level in one fell swoop on Friday and it looks like it is going to race towards the $80 level. Eventually gravity had to return, and I think that is what we are seeing here. The Federal Reserve Chairman being nominated was a little bit more hawkish than most people expected and silver of course is going to be extraordinarily volatile under the best of circumstances, and at this point, it is not the best of circumstances. Silver has become pretty much untouchable.
Gold markets find themselves equally as brutalized, but gold has the backing of central banks so I think that gold will more likely than not recover much quicker than silver will because quite frankly silver had gotten so far out of its own element that it had become something akin to one of these altcoins you see in the crypto markets. Gold on the other hand does have a lot of interest from central banks, but we may have just seen the highs. I think it is a little early to call that, but the way the markets are behaving on Friday, it is almost impossible to believe that there won’t be some type of follow-through. Quite frankly, considering that just two years ago gold was closer to the $1,700 level, it is not a huge surprise that there had to be a reckoning. Sooner or later, markets that are out of control see this type of behavior.
The US dollar plunged against the Japanese yen during the trading week but has seen a massive turnaround and it now looks as if the markets are starting to realize a potential mistake in shorting the dollar the way they have. That being said, this is a market also featuring a massive interest rate differential between the two currencies, so this is essentially how I would have expected the market to behave all along. We bounced from the 50-week EMA, and it looks like if we can break back above the 155 yen level then we could go looking to the 158 yen level.
The US dollar has fallen rather significantly against the Swiss franc and tested the 0.76 level. The 0.76 level is an area that I don’t know is particularly important by itself, but we also have to worry about the idea of the Swiss National Bank coming in and intervening if the Swiss franc gets a little too strong. I still think that is a threat, but the fact that we are forming a hammer after a breakdown like this and, more importantly, we are seeing the US dollar turn things around globally, I think this one might be ripe for a bounce as well.
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