• Comments for June 18, 2018

    On Friday, the markets experienced some sort of a pullback. I do not believe that this would carry any significance if it were not for the continuously weakening 20DMF pattern.



    On the currencies front, the Euro/US$ bounced on Friday after the very heavy drop of Thursday. This is clearly only a technical bounce. I fully expect the Euro to continue weakening this week against the US$. I also expect the US$ to continue gaining strength against all other currencies.







    Note below the weakness in the Australian and the Canadian dollar. Trade issues are the culprit here, with its expected consequence on the price of commodities.





    We can see below that copper and oil prices fell heavily on Friday.





    But so did also gold and silver.





    In the past two daily comments, I wrote about the strength in the PM sector which looked to be defying logic. At least, after two days, logical minds decided to pull the PM sector.





    This whole move in the commodities space has more to do with the US/China trade issues than with the rates differentials after the ECB's dovish announcement of Thursday, which followed a bearish Fed decision of Wednesday. All in all, US rates are pulling back, while the US/German rates continue pushing higher.





    The consequence is money moving into US Treasuries.





    Conclusions:

    If commodities prices are lowered due to trade issues, we should also expect industrial goods to follow suit. this does not necessarily mean that the whole US equities market will pullback from here as except for AAP, leading stocks hardly manufacture anything.

    We can see below that utilities started to attract buyers. Utilities might just do OK in a trade war environment.