Originally published by Chamber of Merchants
Let’s start off by saying that anyone that sold their Gold holding yesterday, will be having a pretty rough day today.
Bottom Line: Gold & Euro & Pound & Yen all reversed and rebounded, leaving the US dollar to fall like a whale from a tree, breaking through every support branch on the way down.
The volatility came about as US economic figures were released:
Traders were still buying the dollar here and there as some data hinted at a further rally. But below you’ll see that the most important indicator for the day is marked by 3 bull heads: The US CB Consumer Confidence.
Conference Board (CB) Consumer Confidence measures the level of consumer confidence in economic activity. It is a leading indicator as it can predict consumer spending, which plays a major role in overall economic activity. Higher readings point to higher consumer optimism.
A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish.
And it came in well below estimates.
Let’s skip the economic textbook tutorial on consumer confidence and cut straight to the chase:
The U.S consumer is not confident in the future with regard to financial security and will save instead of spend. If this trend continues we will see even lower economic growth going forward.
It’s at this point that the US dollar fell off its 99.08 perch down to 98.68 where it licks its wounds now.
US dollar DXY 26th October 2016
As we’ve been discussing for a while now, the dollar would get an extra kick off the cliff if the GBP strengthened. That’s what happened yesterday following Governor Mark Carney’s speech, which allayed fears about further rate cuts:
The Euro strengthened after Draghi’s Speech:
And finally, our darlings, Gold and Silver received a boost and stayed at these higher levels, looking for support:
Gold Price 26th October 2016
Silver October 26th 2016
Conclusion
While many traders, even my heroes, have been throwing their hands in the air, crying “Manipulation!”, unable to trade their systems, my analysis has been spot on with regard to the currencies turning, and the precious metals gaining strength in return.
A Merchant considers the big picture:
Economics, Politics and Fundamental Trends.
Most of all, a Merchant does not adopt the views of the media, but rather reads between the lines.
This may not be easy, but I hope that what I share, as a Merchant, sheds some educational light on where we’re at in the grand scheme of things.
At the very least I trust that you’re becoming more informed and Thinking Better.
Enjoy the Gap Up, Don’t Celebrate it.
See you around the Stock Exchange.