How Low Will the Dollar Go?

November 19, 2018 - 5:48pm

 by Gary Wagner

Once again, the U.S Dollar index is the main driving force taking precious metals to higher pricing. Today’s $2.70 upside tick in gold was almost entirely due to the declining U.S dollar which has been the story for the past four days.

The U.S dollar index as of 4:20 pm EST is at 96.06, with potential support at 95.40 and resistance at its recent highs which came in at around 97.40. Depending on what it does at the current support level of 95.40 will determine future movement. A break below that level would signal a further decline and a bounce from that level would signal prices are most likely to rise on a technical basis.

Recent pressure in the U.S stocks might make it more difficult for the Federal Reserve to stay as aggressive and hawkish by raising rates again in December. During the week of November 12, according to the Fed Watch tool there was a 75.8% chance of another rate hike at their December meeting. That probability has dropped by 6% to 68.9 % in the last week according to the Fed Watch tool. Another interest rate hike in the month of December is less likely because of the recent declines in U.S stocks.

As of 4:20 E.S.T. the Dow currently down 1.75% on the day and a Nasdaq composite down approximately 3% today. The composite index has closed lower 7 out of the last 8 trading days.

An analyst from Goldman Sachs said, “We see several changes to the global economic backdrop which, combined with a few negative medium-run factors, point to more downside than upside to the broad dollar in 2019.”

The upcoming G-20 summit is looking less likely to produce an end to the current trade war.  Statements made by Vice President Mike Pence this weekend at an APEC meeting pronounced that the $250 Billion in tariffs on Chinese goods will not end until China changes their ways.

These geo-political factors have had a significant affect on U.S stocks taking them lower. If this trend continues with no resolution a rate hike in December will be less likely.

Once again, I wish to thank our loyal and devoted subscribers for your understanding and support as I get over my laryngitis, and regain my voice. I look forward and am optimistic about performance towards the end of this year and especially into 2019.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer

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