Welcome to the Artificial Intelligence Outlook for Forex trading.
U.S. Dollar Index ($DXY)
Hello, everyone, and welcome back. My name is Greg Firman, and this is the VantagePoint AI Market Outlook for the week of December the 19th, 2022. Now, to get started this week, we’ll begin where we always do with that very important US dollar index, but once again, we’re basically at the end of the trading year. Liquidity is drying up, so price action is going to be very erratic, very messy as the normal pundits continue to try and push stocks higher despite a clear downtrend. When we look at this right now, what’s interesting at this time of year, that basically all of the major markets are down.
There’s nowhere to hide here, guys. When we look at the dollar index, the initial sell signal from VantagePoint, when we broke through below the T Cross long at the 111.60 area, we can see that the dollar is repeatedly moved lower from November the 4th. Now, we’ve had several replacements, but you can see the structure of the actual market as I’ve laid it out with the VantagePoint point in time indicator. The yearly opening price, the dollar is still positive on the year, one of the few asset classes that actually is. The monthly opening, however, we’re unable to get back up above the December 1 opening price, the weekly bearish also.
Now, again, an aggressive fed, a very determined fed, that is not going to change his mind or the path that he’s put the entire committee on with interest rates, so again, when we look at the indicators right now, we do have an MA Cross here to the upside, but we’re going to lose momentum going into, probably by the middle or latter part of the week as things start to flatten out, and I, of course, don’t recommend any trading during the Christmas break as the main markets will come back in January 3rd, January 2nd, January 3rd, because the banks will be closed on the 2nd, I believe. Right now, the dollar is mildly bullish here out of all the markets, but we’re below the T Cross long at 105.47. Now, what’s interesting in this particular case is we have a fresh sell signal here on the S&P 500. Now, once again, as these pundits talk about lagging indicators like the 200-day moving average, multiple false signals for longs off of that area, the Fed has been clear as to what his position is on rate hikes. At the end of the day until he pivots, I don’t think we should be pivoting either.
S&P 500 Index
The S&P 500 remains heavily down on the year. The yearly opening price, 4778, this is an indisputable bearish market. Now, they are, in my respectful opinion, they’re going to try and say something. The media will spin something to get stocks to try and recover going into the year-end, but it doesn’t look great for 2023 here, but again, a lot of things can change between now and, say February, March of next year, but for now, this is another breakdown. We’ve got the dollar down and the S&P 500 down, so what this shows me is there’s very little liquidity in here.
Basically, people are closing up the books, or getting ready to close up the books for the year, and price is going to be very inconsistent going into the year-end, so what we look for here, you can see, the S&P 500, we’ve been down the entire month of December, but isn’t it comical how the media tells us that we’re moving into a bull market with stocks when the charts simply don’t support that? The intermarket correlations do not support that. As you can see, we’re down again on the month, we’re down on the year, and we finished below the weekly opening price. Now, that does set the bar rather low for downside momentum, so retracement point for next week, 3955. The theory here, as long as we’re below that VantagePoint T Cross long, that the market, the primary trend, which is clearly down, indisputably down, remember when the market recovers or retraces 10%, but it’s been down 30% on the year, and now we’re down 15, that doesn’t equal a bull trend here, guys.
That equals a dead cat bounce if nothing else. Now, it did get above the 200-day moving averages, the pundits have stated, but the sellers were camped out there just above that level, waiting to get back short on this again, so again, keep an eye on 3955, and if we stay below that. The indicators here are the predicted differences, the neural index, the neural index strength. All of these indicators are pointing that a more likely target going into the year-end, it would be around the 3744 mark.
Now, with that too, we can see that also, oil prices, so, so far in the presentation, we’ve got the dollar down, we’ve got the S&P 500, the global equities are all down.
Now, we have commodities like oil. They’re below the VantagePoint T Cross long. With oil, is very interesting. Again, the pundits are telling us that oil has to go higher in December when the charts and the VantagePoint indicators simply have not supported that theory. You can see we’ve had multiple retracements to the T Cross long only to set another new low.
Now, this past week, again, we’re breaking down … Well, we haven’t been above the monthly opening price the entire month in oil, yet they’re telling us to buy oil when it’s just simply not supported. Now, the yearly opening price, 75.39, we’ve got our T Cross long at 77.01. Losing this level, again, is a very bearish setup, and the intermarket correlation of stocks suggest that both are getting ready to go even lower into year-end. The neural index strength, pointing straight down.
Now, there is a little glimmer of hope here for longs for the seasonal bulls. The medium-term crossing over there, the zero line. Now, what this shows me, if we click on F7 in our software, that a crossover took place here, but again, we just don’t have the momentum around this yearly opening price, and quite frankly, if we look at something as simplistic as the monthly opening price, you can see what they did right there. They tell us to go with the seasonal pattern here. Oil makes a push, and then immediately goes the other way, slips below the monthly opening price at 80.42, and we have yet to be above it this entire calendar month, yet Cramer and some of these people continue to bang the war drums of buying oil on the seasonal pattern.
Well, it’s becoming less and less likely that that pattern will complete this year. 2022, there is nothing normal about this calendar year from rate hikes to the Russia/Ukraine war. This is not a normal calendar month in a normal calendar year, guys, so right now, looks like more losses are on the cards for oil. Now, you would think, “Maybe we can get into Bitcoin. Maybe Bitcoin,” but even that too is down substantially, not only on the month, but on the year here also, so basically, so far, every market we’ve looked at is below its yearly opening price, which is a huge bearish signal.
Now, Bitcoin, a lot of talk in the media in that about Bitcoin, but we can’t lose sight of the fact that Bitcoin is still up substantially from its inception price, even from 2016, I believe it’s still up 5,700%. If we look at something like Zoom stock that’s down almost the same as Bitcoin, well, it’s only up 100% from its inception price, so maybe next year, when things calm down, Bitcoin will retrace and start moving back up again, but it is a risk-based asset and it’s struggling here going into year-end. Now, the T Cross long there, 17,200. Again, even if we look at this past week, when we did get a rally in the stock market prior to the Fed, I think it was around 2, two, two and a half percent on the S&P 500, but Bitcoin went up 4%, four point a half percent. The intermarket correlation between Bitcoin and the S&P 500 is currently running at about 98% positive correlation between these two, so again, when you hear people saying you should buy stocks on dips, but you shouldn’t buy Bitcoin, that theory doesn’t make a whole lot of sense based around the positive correlation.
Again, you can check the charts yourself. If you look at a bullish move here, say on December the 14th on Bitcoin, if we look at December the 14th in the stock market, you can see that it too was moving up that day, but they both finished pretty much down, so again, if the S&P 500 is breaking down below here, and it stays below the VantagePoint T Cross long, then Bitcoin is going to have to play catchup, but you can see, again, that Bitcoin is moving below the T Cross long at the same time the S&P 500 is, so it’s good to put some of the comments from Warren Buffer, Mungers, these people that, again, if you’re buying stocks, then just remember that correlation.
Now, even gold, gold is moderately bullish on the month. It’s holding above the monthly opening price at 1768, but still firmly below its yearly opening price. As you can see, as the market approached that yearly opening price at 1829, the sellers were camped out waiting for it, and soon as it got within striking distance, they just drove this thing down, but you’ll notice where it stopped, right on the VantagePoint T cross long, 1775, and then we got a nice rally off that. After the VantagePoint T Cross long held on Thursday, we got a nice rally off of that, but now, we’ve closed high on the week, at 1794, so we need to hold above 1794 if we have any chance of challenging 1829, but either way, my view is that gold will have limited buyers unless we get a confirmed recession, then you have a 75% chance of gold going higher if the U.S. goes into, or if we go into a global recession, which right now, sadly, it appears imminent thanks to the Fed.
Euro versus U.S. Dollar
Now, when we look at some of the Forex pairs going into the next week, again, as the Dollar holds under the VantagePoint T Cross long, we can see the Euro holds above the T Cross long. 1.0495, this is the key level. I could absolutely see this being tested before the year-end. Now, in most cases, real money doesn’t buy dollars in the month of December. From a seasonal standpoint, it’s one of the Dollar’s worst months of the year, but this is not a normal calendar year.
Again, the Euro is firmly below its yearly opening price, so remember, when they tell you that something is bullish, in order for something to be excessively or bullish, it would have to be profitable on the year, so if bought the Euro on January 1, 2022, it wasn’t a great year. You’re still down close to 10%, which is, that’s a lot for a currency, guys. Right now, we have the 1.0495 area. Now, the other area you want to keep an eye on here is the F8, and this is more of a quicker way to see a breakdown, so the VantagePoint long predicted, 1.0598, if we break down below that, then it’s very possible by month end, we go back to where we started the month, right at 1.0406, so keep a very close eye on that. The indicators right now are pointing down on the Euro, and this is, again, this is not a normal calendar year, guys, is the best I can tell you.
Yes, it’s perfectly normal for stocks to go higher in December, oil to go higher in December, gold to go higher in December, the dollar to go lower, but that’s not a complete match, is it? Now, the Euro losing momentum yet again, still in a firm downtrend on the calendar year, but the Euro has been, in my respectful opinion, a little bit overdone with the Fed, hitting the low point here of 0.9536, so again, we’ll keep an eye on it, but I wouldn’t expect much out of this going into the year-end. Now, the same would apply for most of the currency pairs. I believe they’re going to grind to a halt here.
U.S. Dollar versus Swiss Franc
The U.S./Swiss Franc, if the Dollar is the winner out of all the groups, the S&O 500 continues to go lower, gold goes lower, oil lower, Bitcoin lower, the Dollar goes higher, then this would be a place of value potentially.
We’ve got our yearly opening price at 0.9109. This is still bullish. The indicators in VantagePoint are starting to turn bullish. This is what we look for. The neural index strength is crossed above the zero line, plus we’ve got a positive neural index.
The predicted differences are pointing up, suggesting there could be momentum, but we must clear 0.9396 in order for this to have any momentum going into the year-end, but either way, guys, this pair likely goes higher starting mid-January, and that’s what we should be doing right now, looking into next … Not looking backwards, looking forwards.
British Pound versus U.S. Dollar
The British Pound also quickly losing its momentum here. The yearly opening price, 1.3531, it’s very important to review where all of these markets are in relationship to their yearly opening price, going into the end of the year, because very often, this is what you get. You get an attempt to retrace back to the mean, and then a failure.
Right now, the Pound/Dollar is holding firm, but it has to stay above 1.2130. If it can’t stay above 1.2130, then we’ve got a problem. If we use F8 on our control panel, you can see we can get in a couple of days early here. We’ve crossed over that, but combining these two predicted moving averages is very important because we can see that it’s starting to break down, but we also have to break down below the T Cross long. If it holds, then it turns around, the Dollar sells off into the year-end, and the Pound recovers potentially back towards its most recent high at 1.2446, but again, in my respectful opinion only, it’s the media put it to 1.2446 on the strategy of hope, hoping that the Fed will pivot, hoping the Fed will not continue to hike, hoping the stocks will turn around even though nothing really supports a major turnaround in stocks at this particular time.
What the media giveth, the media taketh away is the way I would look at this, is that, because again, should it have even gone to this level in the first place. I think that the answer to that would be probably not, because again, the media continued to put words in the Fed’s mouth.
U.S. Dollar versus Japanese Yen
Now, as we go into, again, into the year-end, the Dollar/Yen is still holding below the VantagePoint T Cross long, but this could pop above that at any time. The Dollar/Yen in a clear uptrend, the interest rate differential between the Bank of Japan and the Federal Reserve remains massive, which hugely favors the Dollar, so again, you can see we’re knocking on the door here multiple times. Four of the last five trading sessions, we’ve been banging into this T Cross long at 137.87, so another strategy that could be applied here is putting a buy limit order just above the 138 level, and when it breaks clear of that, we would in theory be sitting there waiting for that, because again, this is not a recap of something that’s already happened. This is an outlook, right, so we’re looking at what we’re looking forward as to what’s potentially going to happen.
We’ve got our predicted differences above the zero line. The neural index is a little soft, but it is green, so right now, the monthly opening price and the VantagePoint T Cross long have intersected with each other right around this 138.02 mark, so if we get above 138, chances are the Dollar/Yen is going to try and make a run back up towards the high of 139.85.
U.S. Dollar versus Canadian Dollar
Now, with the U.S./Canadian pair, one of my favorite pairs to trade, even though it can be just absolutely crazy sometimes, very few buyers, but very few sellers up here right now, the verified zone high, 137 is containing things, but not to any … You can see that it could be just a matter of time before this … There’s a catalyst that pushes this higher.
That catalyst would be a selloff on the equity markets and lower oil prices. That’s what the catalyst would be to send this higher. If we don’t get that, we go lower and we retrace back down to 1.3564. Now, I think there’s a possibility of that, but that window for that move is starting to close here, so it’s got to get moving to the upside or the risk is still to sell off on some kind of basic stock market recovery, would help push this lower, so our T Cross long, 1.3564. Once again, if you click on your F8 in the VantagePoint software, this is actually pointing that the next move is likely going to be back towards the 138, so our next target on the upside would be 1.3808, providing we can stay above those two key VantagePoint levels. The additional level, the long predicted, 1.3629, we can almost match that on Monday to the predicted low at 1.3650, so keep an eye on those two levels, are slightly below for a potential long.
Australian Dollar versus U.S. Dollar
Now, the Aussie and the Kiwi, once again, they’re losing momentum because they have an extremely high correlation to the global stock markets or a risk-on scenarios, so we are clearly not in a risk-on situation here, meaning there’s a lot of conflicts. You’ve got the Fed hiking crazy every month, high interest rates, possible recession. All these things do not support the Aussie, nor do they support the Kiwi, which is basically the same trade, so we’re starting to break down here two days in a row. We’re closing below the T Cross long. At this time of the year, we just have to be very cautious of false breaks.
We still have a very strong verified support low at around 0.6650. If we break down below 0.6650, then we could see a much deeper move into year-end, but I believe that these two pairs and most of the currency pairs, that there aren’t going to be a lot of fireworks going into the end of the year because next week, by Wednesday of next week, guys, all your liquidity is gone.
New Zealand Dollar versus U.S. Dollar
Things dry up. Nobody is going to take a huge position at this time of the year, unless they know something for next year, but of the two currencies, between the Aussie and the Kiwi, the New Zealand is the stronger currency, and this is largely, as I’ve explained on here before, because of Australia, New Zealand. Australia, New Zealand, they need to sell that Aussie-U.S. and by New Zealand-U.S. to do that particular trade.
Once again, we will continue to monitor things into the year-end, and this will be one of the last presentations until 2023, so again, another volatile market, but there is still opportunity. With that said, this is the VantagePoint AI Market Outlook for the week of December the 19th, 2022.