View from Toronto: US Dollar, Bonds and Gold Could Bounce Up

11/01/2017 11:38 am EST

Focus: STRATEGIES

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

The U.S. dollar (USD/CAD) has risk to move to 1.3 but more likely migrates down to 1.27 if not below as Oil holds above $53 and the USD soften up mid-week onwards, writes Ziad Jasani of the Independent Investor Institute.

Our expectations for the week

The USD is dislocated and expensive on short-term routines, pitted against a BOJ that is unlikely able to further weaken the yen (Abe-Nomics version 2.0 already priced in) and a hawkish Carney (BOE) that is likely to take the pound higher this week (both variables pressuring the USD).

The U.S. dollar (USD/CAD) has risk to move to 1.3 but more likely migrates down to 1.27 if not below as Oil holds above $53 and the USD soften up mid-week onwards.

Bonds & Gold are likely to provide us a mini-bounce this week, as the over-bought condition on the USD and US Treasury yields lead to swing-highs supporting the aforementioned assets (TLT, GLD, SLV, XBB-T, GDX, XGD-T are trade-able when we see a swing-high in yields & USD).

The TSX starts the week > 15,950, and attempts to move towards 16,060. Oil starts the week positive but fails to hold above $53.75, causing a drag mid-week; a retest of support at 15,400-360 is realistic – Energy, Financials & Industrials are likely responsible for the ↓move.

S&P 500 starts the week > 2,580, attempts to move to a projected line of 2,588 with 63% chance to get above, and then to 2,600 with 38% chance to get above.

Strategy this week

Use price strength to trim mid-to-longer-term positions as the S&P 500 Index (SPX) rises to 2,588 – 2,618 projection levels.

Short-term risk-capital only to play a grind higher above 2,580 on S&P 500 and above 15,950 on the TSX in spaces mentioned on page 4 and 7.

Note: If the S&P 500 reverses and breaks support at 2,570 and the TSX presents a swing-high under 15,910 closing most short-term long-side trades makes sense.

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