The Almighty Dollar Reigns As Oil And Gold Fall

As it becomes more apparent that the Japanese central bank will vigorously stimulate Japan’s economy, the yen continues to weaken and the U.S. dollar strengthens.

The euro and the British pound also fell against the greenback, the pound at one point by 1.00%. The continuing anxiety over Brexit and some new data rolling in showing the UK’s economy already contracting because of it, are driving the decline of the formerly sterling currency. Parity is some ways away, out on the horizon like some monster from the deep.

Gold’s decline today is predominantly due to the buck’s strength. Regular traders are shying away, and perhaps may have left the floors early as a heat wave begins to grip the northeast and Chicago.

However, as we wind up a week of fundamental analysis, it’s very important to note that the VIX index of volatility is sitting at 12.18, down another 4.40% today. Less than one month ago, the VIX was at 25. From that point (June 24), it has dipped and dipped and dipped.

Perhaps you can connect the volatility decline to the probability, (as expressed on the CME’s FedWatch gauge), to the very scant “bet” that the Federal Reserve will raise baseline interest rates on July 27 after the FOMC meeting concludes. That probability it will rise is 2.4%.

The Dow Jones, S&P 500 and the NADAQ are all up today, although the percentage rise is small and volume after the noon hour has been slim as Hamptons-itis takes over with the summer weekend exodus.

Asia wasn’t so steady. The Nikkei index tumbled a fully percentage point, the Shanghai about 0.90%. Hong Kong was marginally weaker.

The London FTSE was up, traders showing the love for the falling pound, which assumedly they believe will boost British exports. The DAX was down and the CAC up, but only tiny fractions.

West Texas Intermediate settled down 1.25% as inventories and supply have thoroughly spooked the bulls. Traders, however, thought that both gasoline and natural gas were oversold today and some light-touch trading boosted both commodities. Natural gas is up more than 3.00%. It’s still cheap but has risen more than 33% from the March lows.

Crude is up from its intraday low as we enter afternoon trading. That U.S. equities are managing to climb in the face of such a significant slide in oil prices tells us that many components of the U.S. stock markets are quite resilient and companies have many positive things going for them.

Wishing you as always, good trading,