In 2012 I intend to study inter-market relationships to help invest longer-term trades, so here is just a quick post to get the ball rolling where I’m studying the relationships between FX and Commodities.
1st Chart – USDCAD Daily
2nd Chart – Brent Oil Daily (violet)
USDCAD Relative to Brent Oil
3rd Chart – 20 and 60 day correlation between USDCAD and Brent Oil
Interestingly the relative strength between the two instruments broke its own trendline, providing a 7 day lead for USDCAD to also break its own trendline. By the time USDCAD has achieved a higher high to confirm the change in trend you’d have had 3 months warning that a new trend may be taking place.
– USDCAD and the USDCAD/Brent Ratio Line are both in a steady uptrend – so it may be worth taking a longer-term long position on USDCAD. (Also note the symmetrical triangle forming on USDCAD)
– However if the Ratio Line were to break the trendline then this may provide an earlier warning that the uptrend in USDCAD may be nearing an end, or provide a lead to invest in oil.
Commodities closed beneath resistance and has broken the prior dominant uptrend. Mometum suggests we may see a retracement towards the 50eMA or 200eMA, but overall I expect to see losses over the coming weeks.
Generally speaking declining commodities means a stronger Dollar.
Still very much an experiment, I am trying to extrapolate the underlying cycles within Gold. The main problem I have at this stage is a severe lack of data, as to properly identify the 9 year Juglar cycle I’m looking for I’d ideally need at least 100 years worth of data. However, I do feel I can pinpoint 2 major swing lows that are 9.1 years apart.
* Disclaimer: Any opinions, news, research, analysis, prices, trade recommendations or other information contained on this report is provided as general market commentary, and does not constitute investment advice. Matt Simpson will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.