2017 Mid-Year Recap, Part 1: Oil, US Dollar & Gold.

We’ve reached the half-way point of 2017. Let’s take a look at a few markets and see how they’ve performed, and where they may head from here. Part 1 takes a brief overview of Oil, the US Dollar and Gold.

Oil.

Rangebound, between $45 and $55.

Oil is stuck, and will likely remain so for the time being. OPEC and Saudi Arabia want oil prices higher, but whenever prices rise though “supply restriction” it’s met with continued production from the US.

Keep an eye on the US rig count, which continues to rise, and the weekly storage numbers. This weeks surprise build decimated oil longs and pushed it to the bottom of the range. There’s plenty of opportunity to trade the ranges on oil as they seem reasonably well defined technically, and are supported by “range bound” fundamentals. This could change, however, and the rest of the year could be very interesting if oil breaks the lower bound of $45.

USD.

One word: down.

2017 started with calls for parity in the EURUSD, however the chances of those predictions becoming reality seem far off at this stage.

There are probably easier trades out there right now than picking the direction of the DXY. Whatever the Fed has planned has been well and truely priced into the market. The expectations and bullishness that came off the back of Trump’s election have not materialised, and have evaporated.

Taking trades short USD, pairing a stronger inflation outlook against it, could be a good area to look at. The NZD has gained a lot of attention after a bullish RBNZ statement. Look for other opportunities to match a strong fundamental picture against the USD in the second half of 2017.

Gold.

Grinding higher on a weaker USD.

Gold mostly been range-bound so far this year, although you could argue that it’s trending up. Gold has shown some strength this year, primarily on the back of a weaker USD. The price of gold is usually correlated with the USD, unless there are safe haven flows or concerns.

If you have a bearish view on the USD and equities, it may be worth taking a look at Gold as a long volatility play. It has definitely shown strength, and could continue to do so if equities or the USD weaken.