Markets Outlook Fundamental & Technical Considerations w/c 27th November 2016

FX:

Last week’s reduced liquidity saw the USD ripsnorter rally pause for breath.  As can be seen from the Dollar Index (DXY) weekly chart below the configuration remains bullish for the USD in the near, medium and long term.  

Our current thesis – strong Dollar, weak Yen, weak Euro and recovering Pound – remains very much in play and we are positioned via a number of currency pairs.  Long: GBPNZD, GBPJPY, GBPAUD, USDCAD; Short: EURGBP, AUDUSD, NZDUSD, EURUSD, EURCHF.  Further, a number of EM currencies – notably Asian EM – continue to look vulnerable to further losses.  For example, the Indian Rupee appears to be charting a 3.5-year ascending triangle versus US Dollar.  This may provide a good opportunity to go long of USDINR upon a break.

Commodities:

Inspection of the Deutsche Bank Commodities Index Trust ETF reveals a possible 15-month head & shoulders bottom forming.  

Furthermore, a number of base / industrial metals indicate large bottoming / reversal patterns.  See the below charts for: Iron Ore, Copper, Zinc, Palladium, Lead and Nickel.  Whilst it may be too early to call the bottom of the commodities super cycle, particularly with the USD ever strengthening, these charts suggest a bullish outlook in the near to medium term.

Precious metals chart a different story.  Gold, silver and platinum continue to weaken; gold targets $1,110 and we have another opportunity to short platinum on its breakout of an 8-month head & shoulders top.

Soybean Oil and soybeans are the pick of the ags, with soyoil finally completing a massive 2.5 year head & shoulders bottom in dramatic fashion.

And finally, crude oil comes into the spotlight with the outcome of OPEC’s meeting potentially being the catalyst for new direction in WTI and Brent futures.  The predominant pattern forming on the weekly chart for WTI appears to be a 16-month ascending triangle - or possibly a 4-month head & shoulders top? - with key boundary lines at/around $52 and $44.  

A break either way could see a resultant $15-20 move in either direction.  With an ominous looking shooting star type candle posted last week and COT reports still indicating very high net speculative longs are we set for a dramatic leg lower?  Or will the cartel agree on production cut that satisfies the market and sees as break out dramatically to the upside?  We expect resolution this week.