DXY, USD/JPY, RUSSELL 2000 and PL Forecast – Markets in Motion on Wednesday

DXY Technical Analysis

The first chart is the US Dollar Index and I know most of you don’t really pay attention to it and certainly don’t trade it, although you can in some CFD brokers and futures markets. But this is a very important chart, especially right now because we are seeing a lot of questions asked about the US dollar.

We have broken out to the upside, pulled back towards 97, and it looks like we’re trying to recover again. This gives us a little hint on other assets potentially. So, if we can break the highs of the previous session on Tuesday, I think that’s a very strong sign for the dollar.

Keep in mind that the US dollar has had a record number of shorts for the last 14 years and that typically will lead to an oversold condition that bounces back. I think the fact that so many people are bearish to the dollar is what’s going to give it a bit of a springboard higher. Plus, I can make an argument for the US dollar being higher on several different levels. So, I’m monitoring this chart to see if there is a bit of a recovery. I don’t necessarily think it’s going to be a massive trend change, but I do think that we were overdone.

USD/JPY Technical Analysis

With that in mind, I look at the US Dollar against the Japanese Yen. We are on the threshold of breaking above the highs of the previous session and I think that’s a good sign. If we can do that, then the interest rate differential continues to get you paid, which is what we like. We like that swap at the end of the day and a lot of forex traders, retail traders specifically, seem to struggle with that concept.

Maybe on your account it only ends up being $1.50, but on a much larger account, the people who move the market, it’s a lot more money. Now, it doesn’t cover nominal losses, but it eventually does attract value hunters, people who are willing to hang onto this pair for months or years on end.

We’ve bounced from the 200-day EMA and somewhere just above the 160 yen level, there is a resistance barrier that goes all the way back to 1989. So, this is no joke. With this being the case, if we break out above maybe 162, this thing’s going to be a buy and hold probably for years. We have the Bank of Japan that’s pretending like it’s going to tighten monetary policy; it might be able to a little bit, but the debt load in Japan alone makes that very unlikely. If the US dollar recovers at all, generally speaking, it should do well here.

RUSSELL 2000 Technical Analysis

I’m not looking to trade the Russell 2000, but I’m looking to see what it does because then I can extrapolate that over to the Nasdaq 100, the Dow Jones 30, and, more likely, the S&P 500 because it will move a little bit more like the Russell.

Remember, the Russell is full of smaller companies, and that means that it takes quite a bit more good news to get them moving to the upside, as traders tend to neglect them. Most traders are involved in the S&P 500, for example.
The 2,600 level continues to be significant support, with the 50-day EMA holding things up as well. You can see this thing turned around the same way the other indices did on Tuesday. On Wednesday, I’ll be watching its behavior. If it can get a little bit of a bid, I suspect the Nasdaq 100, and the S&P 500 will do fairly well.

Platinum Technical Analysis

Platinum

The final chart is Platinum and I’m choosing it because it’s right at a large, round, psychologically significant figure in the form of 2,000 and it behaves like silver but without the vicious kind of losses that silver can bring. This is a safer way to play silver.

I like the idea of buying short-term dips. If we break down below $1,990, that probably gets me out completely, but short-term pullbacks and bounces, that’s what I’m looking for here. Maybe not scalp trades, but along the lines of a couple of hours long.

I do like platinum; there is a demand case to be made for it. We’ll just have to wait and see. Hopefully silver gets a bit of a bid; that gives this a bid, but you don’t have to deal with as much of the volatility.