Welcome to the Artificial Intelligence Outlook for Forex trading.
VIDEO TRANSCRIPT
U.S. Dollar Index ($DXY)
Hello everyone and welcome back. My name is Greg Firman and this is the Vantage Point AI Market Outlook for the week of February the 6th, 2023.
Now to get started this week, we’ll begin again with the US Dollar Index. Pretty much went to plan this week, the dollar strengthening at the end of the week. This is a known period of dollar strength at the beginning of the month. In my respectful opinion, again, only I believe it to be institutional funds that are required to buy US dollars at a specific time. Now, where we have to be cautious of is what I also see is that once that dollar buying demand is dried up, the dollar often mysteriously reverses by about the 8th of the month each month, so while we do have a strong or we have a slow buy signal forming here, we’ve closed above the Vantage Point T cross long at $102.38, but just barely at $102.99.
Now, one of the things I would watch very, very closely in the month of February is the yearly opening price $103.66. The dollar is not officially bullish until we clear this level. If you bought dollars on January the 1st, you’re still technically losing on some of these pairs. Again, we’ve got to be very cautious with that. Our predicted differences, our short, medium, and long-term predicted differences are pointing higher and above the zero line. Our neural indexes turn green and our neural index strength is pointing higher, so at the very minimal, the dollar is likely to hold these gains into probably end of day on Monday, maybe Tuesday. But we also have the Fed speaking on Tuesday, and this guy, he’s flip flopping again. Again, he’s trying to hold his ground, but data dependent maybe at the end of 2023, now maybe we’ll see a rate cut. I don’t think so, but we’ll see.
Again, we had a very, very strong payroll number, but you can see that the dollar started making its move long before the non-farm payroll number came out. That happened on Thursday after the media once again tried to put a spin on what the Fed is saying. We’ve moved even higher after that very strong non-farm payroll number, but again, I think they set the bar very low at 106,000 with this new ADP calculation. I think it’s far worse than the original one because again, my model basically set around 350, 300, somewhere between 300 and 350,000 jobs. 100,000 as ADP report was just way too low in my respectful opinion. Again, while we have a dollar buy signal forming here, just remember where we’re at here. $103.66 is a very significant barrier, but if we can get above that and stay above that particular level, then the dollar should move higher, at least for the better part of February. But my optimism remains heavily guarded because of what I’ve seen month after month after we clear the non-farm payroll number, whether it’s a good number or a bad number, the dollar often sells off towards the 9th or 10th of the month.
S&P 500 Index
Now, when we look at the equity markets, the one thing that is interesting here is that the equity markets and the dollar are able to move up and down together to some degree. Now, stocks are holding their gains here, but again, just barely. We’re holding above the monthly opening price at $40.70 or the yearly opening price, excuse me, at again, $40.70. The monthly at $38.53 having already a decent month here, but it could be it … We still have that known inner market correlation that’s spooking a lot of traders from last year. Basically the dollar up and everything else down, which was predicted in last week’s weekly outlook.
Gold
When we look at gold, big drop, Bitcoin moving higher, but again, stocks need to get moving. These indicators in Vantage Point are not looking overly healthy here. The neural index strength is turned and it’s pointing straight down. Our medium term and short term predicted differences are moving lower. We’ve got a caution, a yellow on the neural index, and we’re coming out of overbought, I would say. I’m not an overbought oversold trader here, guys, but we are definitely overextended in the month of January, a very big move. For now to get started this month, we want to keep a very, very close eye to see how the market responds, and if we start moving back towards this, if we break down below 40.70 with that monthly opening, that could be a significant problem for stocks.
Bitcoin
Now Bitcoin, once again, don’t let these pundits at Berkshire Hathaway and your Warren Buffetts and that fool you. The Bitcoin is a stock trade. It’s a risk on trade, but its correlation to the S&P. The Dow is about 98%. If the stocks are going up, Bitcoin’s going up, breaking it down into its most simplest form. Bitcoin is made once again this year, the people that are telling you that Bitcoin’s a scam, Bitcoin, no, don’t buy Bitcoin and well, why wouldn’t you buy Bitcoin, guys? When you look at this kind of a performance track record up 40%, 41% in the month of January, obviously this is something we should be buying, but again, as long as you understand what it is, it’s 98% correlated to the global stock indexes. If stocks stay healthy, then Bitcoin will stay healthy. That’s what the majority of these media pundits should be telling you, but they continue to put a different spin on it. But again, with that kind of a correlation, if you would buy stocks on a dip, then you would definitely buy Bitcoin on a dip, but I do expect a bit of a pullback here.
Now, once again, the yearly opening price, $16,541. I don’t think we’re going to pull back that far, but keep an eye on the Vantage Point T cross long. 22,528. We’re looking to stay above that this coming week. If we can’t stay above this level, then both Bitcoin and the major global indexes are likely to fall. You can see that the indicators in Vantage Point are turning negative. They’re the neural index strength, the predicted differences, so a corrective move would be perfectly normal, guys, after a 41% increase. If you traded nothing else the rest of the year and you bought Bitcoin as suggested on here on January 1st, you’re already up 41% on the year. Again, some of the media outlets that we watch, we really do want to take it with a grain of salt because this is not a one time thing with Bitcoin, guys. The annualized returns other than 2021 was a tough year for Bitcoin like it was for stocks, but 238% is the 10 year annualized returns here. There’s no other market that is even coming close to that. The closest index that’s actually, that would be the NASDAQ. Again, don’t let some of the media pundits fool you. So far, Bitcoin’s off to a heck of a start, but again, a bit of a pullback would be perfectly normal.
When we look at this now, we go in and we look at our gold contracts. I talked about this one last week and pointed out that there isn’t a lot of buyers up here around this anywhere over 1900, 1930, there’s not a lot of buyers up here, and we’re coming into a known period of US dollar strength, which occurs at the beginning of the month. Gold didn’t stand a chance and the Fed just simply helped that along a bit. But as you can see, again, the gold’s initial reaction to the FOMC on Wednesday is very often false. Then on Thursday, the real price shows itself and you can see the gold moved lower. Then on Friday, the non-farm payroll number was just the icing on the cake for the gold short. But I think there’s further trouble ahead for gold. In most cases, the seasonal pattern in gold doesn’t really see that strength until around April, but January is usually a good month for gold. But soon as we left January, the gold buyers left with it.
The indicators right now, I wouldn’t be too concerned with the position of the RSI. Yes, it’s oversold. Well, something can go into overbought or oversold for a very, very long period of time. Remember when you’re talking about overbought and oversold, you’re basically telling the market to stop going higher or lower and turn around and go the other way because the indicator said so. It very seldomly works that way, guys. Again, just remember where we are in the month right now. Even if the dollar did pull back a bit, which I believe it will next week, then that still is not necessarily going to help gold because they’re just going to go into stocks and into Bitcoin. Again, right now, the bias for next week for gold remains further paying ahead unless Powell directly points to a recession then, which is possible, that’s about the only thing that would help gold at this particular point.
Crude Oil
Now, when we look at oil, oil prices, again, getting all tangled up for the entire week, right at the very start of the week in the Vantage Point T cross long. The predicted moving average, we had a retracement, the reversal and retracement on Tuesday. Then on Wednesday we’re down hard, down hard again on Thursday, but Friday it really took a beating.
Now do have verified support sitting down here, down around the 73.50 mark. Again, we’ll keep a close eye on this level, but most of the indicators are pointing still lower on oil. Once again, we’ll monitor these levels, but not a lot of buyers on this particular contract at this time and Vantage Point is forecasting it to move lower.
Euro versus U.S. Dollar
Now, when we look at some of our main forex pairs, once again, a classic bull trap set up here last week, which I warned everybody ahead of time, that regardless of the payroll number, the dollar is often strong in the first week of the month. That is, I believe institutional funds are buying dollars not because they won’t necessarily because they want to. They have to pay government employees, they have to pay pensions, retirees, there’s a lot of unfunded liabilities that you don’t even know about or hear about, but they have to be paid so they need dollars to do that. Buying Euro US last week is definitely a problem.
As you can see, after the Federal Reserve, the neural index strength immediately started pointing down. By Thursday we had broke the zero line, and by Friday it had fallen even further. Right now, just remember the yearly opening price $107.04, we are not below that yet. My view is putting all my indicators aside and looking at price action. Then in order for the Euro to be bearish, I need a breakdown below that yearly opening price is what I need. That level is 107. Again, you can see it up here in the Vantage Point Software $107.04. A good place, though, for buying dollars was definitely shorting your OUS. If you’re aware of this monthly cycle, then you’re not going to get caught in these bull and bear traps that are constantly being set up for you every single month. Right now, I would anticipate a test of that yearly opening price, and that level is $107.04. Be very cautious at that level is my strong advice.
U.S. Dollar versus Swiss Franc
When we look at the other side of this trade is the US Swiss Franc, which is again a very, very good place to buy dollars because the signal was already in progress. Now, this pair follows the dollar index very, very closely, and you can see when Vantage Point first started warning us, this was all the way back on January the 17th, warning us to stop selling dollars at that particular time. US Swiss Franc has been moving up and down throughout there, but you can see that a more solid signal formed on Thursday night because a Vantage Point updates at 6:00 PM Eastern every night, 6:15 Eastern, so we had these numbers for Friday on Thursday night at 6:15 PM. We know we’re in a period of dollar strength, so this was very, very good value buying. We have a verified support low coming in at $90.86. We went slightly below that by about 20 pips, I think, on Thursday and then just skyrocketed out of there on by the end of day on Thursday and into Friday. Our T cross long $92.05, that’s our support to start the week. We’re looking for this to extend higher, but we must get past the verified resistance high $92.88. That would be our point.
Also, we have the yearly opening price at $92.51. This is a big, big level. If we can stay above that yearly opening price, then this pair will officially turn bullish and that opens the door to a potentially much bigger move, maybe $93.50, $95, $96, maybe even higher. But remember, we’ve gotten the Fed on Tuesday, so be cautious.
British Pound versus U.S. Dollar
Now that dollar strength really, really hit the pound dollar. As you can see right from last week’s weekly outlook, the pound really just did nothing, sitting up against these verified resistance zones, and then ultimately by Thursday it’s succumbed to it, The Bank of England certainly didn’t help the pound any, but by Friday the non-farm payroll, that was a big problem. Now this blue highlighted $120.97, again, is the yearly opening price. We’re looking for a sustained break of this level. In my respectful opinion only, this is a very dangerous area for longs or for shorts, but the indicators and Vantage Point are pointing down. My only concern, and again, I’m not somebody who trades over, I could care less about overbought or oversold, I’ve seen this game way too many times. Something can go into overbought or oversold territory and it could sit there for a month, guys, so I’m not playing that game. These predicted differences are still pointing down. The neural index strength is pointing down. We’ve broke the Vantage Point T cross long and we’ve broke the yearly opening price. I would say at the very least, we’re going to hit into the $118.42 area. If that level breaks, then we could be going, dare I say it, lower. But as you can see, there isn’t a lot of support down here until around the $113, $114 area.
This could be a very substantial trade, but if we look at this, and one of the things I always love to do is look at where, what did this do a year ago? When we look at it from that perspective, you can see that this thing just took a beating. Again, well, maybe that was just an oddball year. What about two years ago? Well, two years ago, it really didn’t do that much better, did it? A little bit and if we go back three years on this, you can see a massive nose dive on this. This is not necessarily a one-off. If I was a betting man, which I think it’s safe to say I am, my bet would be to the downside here. But again, we need to stay below the yearly opening price. And of course, the Vantage Point T cross long at $122.74.
U.S. Dollar versus Japanese Yen
Now, when we look at the dollar yen, not one of my favorite pairs here, guys. The interest rate differential now with the Fed still heavily favors the US dollar, heavily favors do the dollar. The yearly opening price in this case is $131.10, so we’re closing slightly above that but this points towards potentially another rally to the upside on this. My concern here is the inner market correlation to the global indexes, stock indexes. If they fall, then that could indirectly strengthen the yen temporarily, so be cautious with this.
But the same deal, the indicators are all pointing up. At least the open push to begin for the first couple of days of the week heavily favor the dollar. Then you might want to just take a step back, but as long as these levels, $130.30 on the Vantage Point T cross long and $131.10, the yearly opening price, then you’re light years ahead of the crowd here or the herd as they call it, right? We just need to know that these are important levels to us, and if we can stay above them, then we have another shot at, I don’t know if we’ll ever get back to $152, I still can’t believe this pair got that high, but it just goes to show you. The dollar yen was literally overbought at like $130, $140, and it proceeded to go to $150 into the one 50 area, so be careful about trading a reversal signal like that. Oftentimes you end up catching the falling knife. But potentially a long trade, again, at least at the start of the week, looks more than reasonable.
U.S. Dollar versus Canadian Dollar
US Canada, I’ve often talked about this one in the Vantage Point live training room, is that we have this phenomenon that occurs with this pair almost every week, and whatever it does on Monday, it very often does the exact opposite on Tuesday. I’ve done this in the Vantage Point live training room every week for probably since 2018. That’s how long this has been going on before that actually. But you can see on last Monday’s trading US Canada proceeds to show itself very, very bullish here, stops for the day, right on the Vantage Point T cross long at $134.11. Then the next day it pushes up higher and blows through it, making it look ultra, ultra bullish. But we can assess that the yearly opening price at $135.50 is sitting up there. It got close to the flame and then boom, straight down.
Again, it never recovered from that until about Thursday and then on Friday we’re starting to turn higher. Again, $133.07 is the monthly opening price providing that support to us. Each week, always make sure where your monthly opening is, your weekly opening is, and your yearly opening price, and then start working your indicators. Right now, Vantage Point, the medium term cross and the long-term predicted difference with the neural index green, the neural index strength positive, we’ve got a breakout on the RSI, and the breakout is from the 60 level, not an overbought or oversold. We’re using the RSI as it should be used, momentum based. Momentum is building, but if Monday and Tuesday is reversed, then there’s a strong possibility we go lower first on Monday, then on Tuesday it mysteriously goes screaming higher. Whatever the trend is with this pair from Monday to Tuesday very seldomly matters, guys, unless you’re in a strong trending move, but the markets are only trending 20% of the time. That’s a statistical fact. This could be a strong trend.
Again, one of the ways you can always look at a seasonal pattern is going back from a year ago, what did it do? Well, it went higher a year ago. What did it do two years ago? Well, it went down two years ago. Then if I look three years ago, it was a strong upward move all the way into March. If odds are, well, that’s telling me there’s a 60%, 67, if I take the three years, one down, two up, that’s about what? 67%. There’s a 67% chance that this thing is going higher next week. That’s the way I would look at this. Statistics matter, guys, is all I’m saying. What I found particularly interesting is there the known intermarket correlation here. The intermarket correlation is 100% to the Canadian dollar in the S&P. If the S&P 500’s going up and US Canada’s going up, there’s something very, very rotten.
Australian Dollar versus U.S. Dollar
That brings us to the Aussie US. The same thing is happening over here. You’ve got the equity markets moving higher, but the Aussie’s moving lower against the US dollar, and then it got absolutely creamed on Friday. But this selloff didn’t start on Friday with the non-farm payroll number. That’s not true. Don’t let anybody trick you into believing that. This started on Thursday and the neural index strength picked up on a day before that actually happened. The predicted difference cross, well, that was way over here. That was on the 27th of January, and it’s been basically bouncing back up and forth against this verified resistance high at $71.42 ever since. Now it would appear that we are going to target the yearly opening price that’s coming in at approximately $68.17. This level would be in our crosshairs, but we need to get there quick, guys, because like I said, 80% of the time the dollar has lost its momentum by Wednesday of the following week after the non-farm payroll number, when real institutional buying of the dollars, required buying is gone. Just be mindful of that, but definitely a bearish start to the week.
New Zealand Dollar versus U.S. Dollar
The same thing would apply, this is the same trade, guys, except surprisingly the New Zealand’s a little weaker. We’ve broken down below the yearly opening price. You can see $63.50. We’re closing the week here at $63.27. Just like this told you on pound dollar, be careful around that area here, guys, because we are now in February. I believe we are very, very close to a trending move. Okay?
If that’s the case, there’s a slight edge here for the dollar in the month of February because there’s a known seasonal pattern. The best pattern I think in the dollar is between now and February is usually strong for the US dollar, but September to November 1st is very good. My concern with this early rally in February this year is because the dollar had such a good year in 2022, and actually in 2021, the dollar had a heck of a year too, considering past years, and it maintained its momentum above the yearly opening price. The main event risk I think we’ve got coming this week is going to be the Fed. Just Fed speech, I believe it’s on Tuesday. So just be careful around that, but other than that, I think we have some very good opportunity coming up yet again next week.
With that said, this is the Vantage Point AI Market Outlook for the week of February the 6th, 2020.
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