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Dollar Higher After Claims Report

January 18, 2024
Frank Cabibi

The number of jobless claims added this week was far less than the expected outcome indicating that the US economy is still holding up despite long term high interest rates. Here are some ways to look at the dollar this week and next.

EdgeFinder Analysis

Gold is now struggling at a score of -6 on the EdgeFinder. The score flip occurred earlier this month when the decline led to an eventual negative number. Today's lower unemployment claims did not help the bullish case for gold either.

COT is showing short positions on gold and long contracts for the dollar. The only category that gold has the upper hand is in the seasonality section which is clearly not helping the metal this month. Since the start of the year, gold is down over 3%.

GU doesn't necessarily stand out among the EF scores, however, it is in an interesting spot. Higher CPI than expected in the UK suggested that the BoE may become more strict on interest rates. But, investors also understand that higher rates could severely damage the economy. So rates may need to stay where they are regardless of where inflation goes in the short term.

Price broke below a rising trend line that served as a heavy level of support on the 1D timeframe. The pair came up to retest the trend line after falling beneath and now appears to be rejecting. This breakout may unfortunately spell the start of a reversal if price retests the lows from yesterday.

USOil is still a bullish score despite the negative seasonality. Last week's CPI in the US indicated that prices are rising. As a result, oil prices may do the same. Even though Core CPI remained unchanged, it doesn't account for energy like the year-over-year gauge which rose by 0.3%.

The net change increased to a slight bullish lean for the week on COT. One problem with oil's sentiment is that retail is majority long this commodity. Lower unemployment claims, however, may fuel today's moves to the upside.

Retail Spotlight

Retail sentiment is leaning bullish oil and bearish dollar. Gold remains mixed as the crowd adopts a risk-on attitude. This could be a problem as retail usually emits a contrarian signal around sentiment. In other words, if they're dollar bearish, it might mean that the dollar is actually bullish.

Smart Money Spotlight

With emphasis on the oil market which has been so beaten down by sellers, it may be time to see some kind of reversal to the upside. Net bullish retail sentiment is declining while COT remains steady bullish.

Fundamental Spotlight

USOil is +2 on the labor market section. This is because jobless claims came in lower and last NFP was a good sign. Better economic numbers is usually a good sign for the commodity as it suggests more spending on energy.

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