Welcome to the Artificial Intelligence Outlook for Forex trading.
U.S. Dollar Index ($DXY)
Hello everyone. Welcome back. My name is Greg Firman and this is the VantagePoint AI Market Outlook for the week of November the 21st, 2022. Now to get started this week, we’ll begin where we always do with the US dollar Index. Now very few sellers of the dollar in general this past week. We can see that after the volatility of the previous week, we’ve got the PPI number. The Fed can officially start counting, in my opinion, as the best language that I could use by, because we’ve got a slightly lower CPI number and a slightly lower PPI number. However, the Fed has been very, very clear on his position, despite the fact the media keeps spinning this, that the Fed is going to pause, he’s not going to hike any further. The Fed has said no such thing to dispel that myth right now, the Fed has actually, Bullard has come out last week even further hawkish suggesting they could be going to five, even 7% before inflation is under control.
So that narrative that the Fed is going to pause is extremely unlikely, but the event risk this coming week will of course be the Fed minutes. So we will get a better insight as to what the entire committee thinks in which way they’re going. But in my respectful opinion only they’ve been crystal clear as to what they’re going to do and they’re not budging from their 2% inflation target. So the dollar pausing out here, it is a holiday short next week, a holiday, short week, next week, excuse me, with the US Thanksgiving. Notoriously volatile week. So the dollar here we have, the way the charts are set up, I’ve got the neural index with the neural index strength, the predicted differences, the medium and long term predicted differences, and this is what will be used for this week’s presentation. With of course, the verified zones and the weekly, the monthly, and the yearly opening price.
So the dollar’s still in a very firm up trend. The yearly opening price, 95.64, that is indisputable. When we look at the dollar, the dollar has been extremely bullish the entire calendar year. Right now, we’ve got a newly formed verified support low that’s coming in at about 105.34, and that is very, very close to the 200-day moving average. Also that the market will be watching very closely. We briefly dip below it and then immediately move back up. So the structure right now, our TCross Long 108.86, we have again the neural index strength. Now this is the difference. The neural index is red, green or yellow, red being down, green being up, yellow being cautious like a set of streetlights. But the neural index strength itself, it allows us to see inside the neural index as to whether it’s continuing to slope down or it’s slowly reversing the other way.
So when we look at this, you can see that the neural index started rising right at the beginning of last week. We had another dip, but the neural index continued neural index strength, excuse me, continued to advanced higher. Then finally, we broke above the zero line, and now our neural indexes turned green. We look at the medium term crossing the long term predicted difference, which is telling us that if nothing else, the dollar is going to correct higher, potentially back towards this 108.86. Or in the alternative, I could make the argument that this is a corrective move lower in the broader up trend and the dollar is going to now resume its up trend. That is entirely possible, but we need those Fed minutes. I think first, if we see the dollar mysteriously gaining strength prior to Wednesday, excessive amount of strength, I would argue that those minutes have been potentially have been leaked.
So monitor price. But right now we know where our support is. Down right around 105.30 and the indicators and vantage point are suggesting the dollar index is going higher. Now, the main intermarket correlation in the markets right now indisputably is if the dollar is going up, stocks are going down.
S&P 500 Index
Now this past week you can see we’ve got the weekly opening price and the S&P once again, basically not making any gains really on the week at all, other than briefly on Tuesday. We could see that the S&P went up to a high of 4028, but that’s also where the 200-day moving averages on the S&P. So we’ve got the dollar index at the 200-day moving average at 105.30 approximately, and then we have approximately the 200-day `moving average around 4020. So that’s where our resistance is, and you can see the stack levels.
Now, the primary trend and the stock market is clearly indisputably down. You can see that the yearly opening price, 4778, the S&P 500 guise has never been positive on the year for any more than a couple of hours back in very, very early January of 2022. So again, when we’re looking at what the trend is, the trend is clearly down. So right now we’ve got our medium term crossing our long term predicted difference, warning us that the medium trend or the corrective move up is again, is losing momentum here.
So right now, we’ll watch this very closely. The support for this week is the TCross Long 3876. What we aim to do, or what I aim to do with these particular videos is move away from some of the short term indicators and keep our long term medium and longer term indicators on the screen so we can visually see them. If you like to use additional tools, I personally don’t, I’m not a big fan of the 200-day moving average, but the market is. So if the market believes that that particular number works, then I should respect that and say, “Okay, well these are our two levels.” In order for a bigger move up or down on stocks or the dollar. Then again, in my respectful opinion, those two levels need to, or one of the levels needs to break on either the dollar index or the S&P 500.
There is about 99% inverse correlation in these markets between these two. So not a lot of stock buyers this past week, earlier in the week. And then after that, down we go again, the Fed, Bullard coming out and again, clarifying to the market. There’s no pivot, guys, I don’t know who’s… The media can say whatever they want, but there is no pivot coming from the Fed, the exact opposite. That doesn’t bode well for stocks. So we can look at this, say our monthly opening here, price is at 3901. So it’s actually mildly positive on the month, but not by much and still firmly below that yearly opening price. So again, I believe that there will be a breakout this coming week on either the dollar or the S&P 500. But if we look at the actual primary trends on both, the dollar trend is up. The S&P is down.
The dollar usually doesn’t do very well in the month of December, but this one could buck the trend because the market is betting for some reason that the Fed is going to pivot and stop hiking, even though he has clearly stated, he’s not. And he’s also stated that he doesn’t care about the unemployment numbers, he only cares about inflation. Unemployment can be up or down, he could care less. Very interesting. I’ve never personally seen that, and it’s been probably 15, 18 years since I’ve seen the S&P 500 unable to get above, at some point during the calendar year, the S&P is unable to get above it’s yearly opening price and stay above it for even a couple of weeks or a couple of months. We don’t even have that this year, guys. It’s been down the entire calendar year. So watch this again, our TCross Long 3876. If we start losing that breaking down this week, then the primary trend is likely going to resume.
Now, when we look at gold prices here, once again, gold had a big push up with that softer CPI number, slightly softer PPI number, but nothing that would hold gains. So you can see that with using the weekly opening price here, we started to break down below that. But when we look at the neural index here, we can see that the neural index is green. But if we look at the neural index strength, you can see that it’s actually pointing down, it’s sloping down, it’s losing momentum in the market. Then ultimately, we broke under the weekly opening price, and that triggered further gold, probably just profit taking on gold. But again, the question is the US or is there going to be a global recession coming here, which usually favors gold.
But this year, I’m not convinced that gold’s going to make a lot of gains. 1829, the yearly opening price, we’re still firmly below that. Very little is changed, but a lot of this is just speculation that the Fed, but remember what the Fed said, clearly that it will take multiple months of lower inflation. That’s what it will take, multiple months. And that’s why I use the terminology. Maybe we can start to count this, but the count starts at one guys, it doesn’t start at 10 or eight because we don’t have that. So it is going to be likely several months into the first quarter before the Fed even thinks about pausing. So once again, gold is, you can see the gold buyers are getting a little nervous whenever we get close to this yearly opening price. So right now we have a very similar signal here, the MA diff cross.
This is right now, it’s a corrective move lower because we’re above the vantage point TCross Long, but the primary trend on gold right now and this year is actually down. So when we look at this, if I go back, we look at this over the nine month period, even the Russia Ukraine War couldn’t keep gold prices up, and then we broke down here in June below that yearly opening price, and we’ve just consistently made new lows here. So the theory here would be that I could definitely see gold. I would think that gold would be able to get towards the 1800 mark, but now, well, the indicators in VP are starting to roll over to the opposite side. But again, I view this as corrective while above the TCross Long. This is why I only have one predicted moving average for this presentation.
So there’s less confusion around the shorter term crossover. So right now that TCross Long 1718. One of the things I always say is that the further we move away from 1718, the more likely it is we’re going to retrace back to it. And that’s exactly what we’re doing right now. So keep an eye on that. Right now, the weekly opening price for gold is probably going to start around the week around 1750. So gold will have to maintain above 1750 to keep this bullish momentum. But the indicators in VP are saying that is unlikely.
Now, when we look at Bitcoin, once again, a lot of false information being all us traders or investors is that we hear on the news every day, Bitcoin’s down 70%. See we told you it’s a scam. Remember, when they’re talking about how much something is down, shouldn’t they also be talking about how much something is up.
So yes, bitcoin is down 70% on the year, but even if we look at Bitcoin from say 2016 where it was trading at 300 bucks, 315 bucks, it’s still up 5650%. So what’s happening with FTX, this is mismanagement. It’s not the broader Bitcoin market. You’ve got the Charles Mungers of the world coming out of the woodwork here saying, “See, I told you it was a scam.” Bitcoin’s annualized returns for the last 10 years, 238% per year top investment. So that means Berkshire Hathaway and Buffet and his cronies, that means they missed the best investment over the last 10 years. That’s a little scary that somebody would come on and say, “Well, see, we told you it’s down 70%.” But well wait a minute. It’s still up 5600% from just 2016. And if you go back further than that, it’s up considerably more than that still.
So where Bitcoin goes from here, that’s left to be seen. You can see the neural index strength is very much in a cautionary stage. This is not the time of the year where Bitcoin does well anyway. So again, we will continue to monitor the developments in the crypto market. But in my respectful opinion, the media once again is spinning this with only giving you some of the facts, not all of them. So what I try to do is advocate both sides. The bull argument and the bear argument, yes, we’re down 70%, but we’re still up again 5600% since just 2016. So we remember back in the days of Apple when they had dropped considerably, almost disappeared altogether. And now look where Apple is. So it is tech, it is volatile. But right now, what in my respectful opinion Bitcoin will need is it will need the stock market to rally. Every time the S&P, the Nasdaq, the Dow has gone up, Bitcoin has gone up with it.
That’s a fact, guys, you can put the charts side by side. Bitcoin remains about 98% correlated to the S&P. Even after that, the announcement of FTX going under the S&P rallied the next day, and so did Bitcoin after they said that’s it, Bitcoin to 10,000. It rallied up to 18, 19,000 the very next day. So this is where we’ve got to look and understand intermarket correlations. When we understand that, then we can say, “Well, yeah, Bitcoin’s got some struggles ahead of it, but it’s got a very high correlation to the stock market.” So if the stock market breaks out to the upside next week, then bitcoin would go higher, not lower. But if the stock market breaks down under the 200-day moving average, gets pounded lower next week, Bitcoin will follow.
Now, when we look at going into our oil contracts, once again, the oil contracts not doing overly well. And again, this could be another argument that inflation is coming down, but oil prices are normally moving in this seasonal pattern at this time, in most cases anyway, you can see it from last year. We moved down consistently until we started moving into January, and then we started moving back up. So again, I think we have to take, or we have to really be careful what media pundits we’re listening to because I don’t think they see the intermarket correlations. I don’t think they’re seeing the seasonality factor of it, but they are promoting everybody to get long stocks, stocks seasonality, stocks are going higher. The chart I’ve just shown you paints a very different picture. So when I look at oil right now, when we look at it, first of all, we’re saying that oil is normally not that strong right now anyway, but the indicators are all still pointing lower.
I would respectfully submit that we keep an eye on this neural index strength indicator because again, it can show something, the neural index can still be read, but you can see here that basically it warns us there’s potentially momentum building in the opposite direction. So that’s something we want to continue to watch. In my respectful opinion, the TCross Long 85.97. Once again, the further we move away from it, the more likely it is we’re going to retrace to it.
Euro versus U.S. Dollar
Now, as we get into some of our main pairs, once again looking at the euro from this past week, very few buyers of the euro up at these particular levels. The one thing we do have to ask ourselves, has anything changed in the Eurozone, in the UK? Is the war over, do they still have an energy crisis? Of course they do. By shutting down those coal and nuclear plants, they shot themselves in the foot everywhere here, and that’s not going to be fixed before the snow hits. So right now, reality check for the euro is what this week is likely going to be.
If the dollar advances the euro is going lower, if the dollar tanks, the euro’s going higher. But you can see that we actually finished the week virtually exactly where we started. We had a little popup there on the PPI number, and then that was quickly put to bed by Fed Mullard by saying that, “Look, we could be going to 7% here.” So right now, I think that there’s going to be… If they’re going to continue to buy the Euro, they’re going to do it very cautiously ahead of the Fed. But if there is a significant breakout on Wednesday morning or late Tuesday trade, then that could mean again, that those Fed minutes were leaked and they’re trying to get into the trade early, or they’re trying to get out of the trade before those fed minutes because they know that it’s going to be a hawkish minutes, which I suspect it will be actually. And if it is, it could be a euro killer.
So I would be prepared for the potential for a move into 1.0141. We have a newly formed verified resistance high coming in at 1.0479. So another scenario that often I see play out here is that when we start the week, we immediately push towards the previous week high and then mysteriously on Tuesday, it goes the opposite way. Be very, very careful of that because right now our neural index, our neural index strength, the MA diff cross again, is warning of dollar strength.
U.S. Dollar versus Swiss Franc
When we look at US/Swiss franc, another potential dollar long area, we see the same signal, the medium term crossing the long term predicted difference, the neural index strength showing a slightly different signal than the neural index itself breaking above the zero line, we’ve got, again, a newly formed verified zone, the yearly opening price, 0.9109. You can see how the markets springboarded off the weekly opening. My only concern is we are considerably lower from the monthly open out at the parity level, but I believe we’re going to go up and test this TCross Long at 0.9697, and that potentially will open the door back up to the parity level or above. But this pair does still show the overall depreciation of the US dollar. I’m used to trading this one guys around the 1.15, 1.20 area, even the 1.10, 1.8 1.06. So it’s still showing the depreciation of the dollar.
British Pound versus U.S. Dollar
Now the British pound this week, once again, I believe it’s too is going to struggle up here. So when we look at these levels right now, the weekly opening price, we’re just staying above it. It is doing better than the euro, but not a lot. So the verified resistance high for next week 1.2026, we would have to consistently stay above that for this to remain bullish. You can see 1.3531, the yearly opening price still in a very bearish trade formation. We can also assess the medium term crossing the long term predicted difference is even more troubling to me because again, that’s saying we’re losing momentum here. The pink line over the blue line, it measures the medium term crossover and vantage point against the long term crossover. And this is warning that we don’t have a lot of buyers up here. And when we look at how we started the week, once again, we have a very, very brief spike in the PPI number, which was not sustainable. But we did hold above. We did close above the weekly opening price. It did do better than the Euro currency, but not by much. So again, our TCross Long 1.1630, the probability of at least that area being tested next week is extremely high.
U.S. Dollar versus Japanese Yen
Now, the dollar/yen after that selloff from the previous week is now also very little to no follow through from the previous week. This is all because the media’s spinning the CPI number that now the Fed has to stop. Now the Fed has to pause and pivot. No, he doesn’t. And he;s said multiple months of lower inflation, not one, not one number, multiple months. We don’t have that. So as you can see, the dollar/yen buyers step back in. But the medium term crossing the long term predicted difference, the neural index strength crossing above the zero line after a level that has not been hit in probably 10 years, like the dollar index. When you look at overbought oversold, looking at the neural index strength, I don’t have a reading this low on the dollar index in over 10 years, 15 years. So it’s an extreme oversold condition.
I believe that potentially, so is Japan, US/Japan. So it’d be looking for a move back towards the TCross Long 143.35. Remember guys, this is still the number one carry trade out there. Long the dollar short the yen, and if the Fed continues to hike, the interest rate differential gap is going to grow bigger, not smaller. Even the Fed only hikes 25 basis points a month from here on out. It still widens that gap making the dollar very attractive against the yen.
U.S. Dollar versus Canadian Dollar
Now the Canadian dollar, once again remains in its yearly up trend. The yearly opening price, 1.26,37. Zero sellers down here right at the very start of the week here, they have a fake price, which looks bullish on the first day on Monday. We do this one in the vantage point live training room every single week, and this is what Canada does. And so it makes a bull move up. Then it sells off on Tuesday and then on Wednesday you see the real price as we start working our way back to the TCross Long. And this particular setup, again, we’re above the yearly opening price, the weekly opening price, the monthly is 1.3623, very likely that we are going to retrace to that. But we must clear the vantage point TCross Long first at 1.3447, where initially to start the week, I believe we’re going to have some sellers here, but it’s likely a fake price. Remember, the one thing I’ve always tried to teach to in the rooms and the seminars is that you have three currencies that are tied to the S&P 500, the Canadian dollar, the Aussie, and the New Zealand. Once again, is this a warning sign that the dollar is going to be the winner between the battle between the dollar and stocks?
Again, suggests that the dollar is not down and out here, right or wrong, it’s not about being right or wrong guys. It’s connecting the dots to these intermarket correlations.
Australian Dollar versus U.S. Dollar
So right now we have had zero buyers on the Aussie to begin the week, and then we end up closing below the weekly opening price. We’re below the yearly opening price at 0.7264. This is still in a very strong down trend, the monthly opening price, 0.6396. So again, if we start breaking down and we hold below the weekly opening price, the very minimum price we would likely target would be 0.6556. The same thing applies to the New Zealand, but I have argued this month, particularly with my own direct clients, that if you must buy or sell this, and in actual fact what we’ve done is we’ve looked at Aussie/New Zealand, saying the New Zealand on the seasonal basis is the stronger currency than the Aussie. So if I don’t want to trade Aussie/US and New Zealand US, I simply go over and short Aussie/New Zealand.
The month of November over the last five years, the Aussie/New Zealand pair has never closed above its opening price. It’s been bearish every single November for the last five years. That’s a seasonal pattern, guys, an exponential seasonal pattern that tells me that.
New Zealand Dollar versus U.S. Dollar
So instead of going after longs on Aussie/US or longs on New Zealand/US, I can take the safer bet and just short Aussie/New Zealand without the exposure, direct exposure to the US dollar. So just another way to play that. But again, we are going to have another volatile week with those Fed minutes, and I do suspect there will be a breakout on the dollar or the S&P 500 coming next week. So with that said, this is the VantagePoint AI Market Outlook for the week of November, the 21st, 2022.