Pullback entries for long gold. I'm not planning for entry zone unless there's a sizable pullback. If I do enter without pullback, it will be to hedge a USDJPY long position, but I would probably just lower USDJPY exposure as opposed to entering XAUUSD for an impulsive hedge. If I end up getting ideal XAUUSD entry before USDJPY, I'd be more open to entering USDJPY as a hedge, even if i'm chasing a USDJPY breakout rally. Any XAUUSD longs would have tight stops. If USD strength returns, gold would be a horrible long obviously, so I'll be extremely cautious.
Again, I'm not blindly bullish gold/bearish USD. I'm attempting to go long a makeshift XAUJPY pair at ideal entries. I'm not super confident long XAUJPY will even work, and if it doesn't, my sizing and stops will protect me from unacceptable losses. The idea is to stay nimble and have an open mind. USD is already down massively from 2022 highs, and gold is already up significantly from lows. That being said, I'm trying to follow the trend. DXY is still up massively from 2021 lows despite the recent pullback, and gold is far from ATHs, so I believe the USD bear trend has room, especially if news continues to be bearish USD. I think the probabilities have decreased significantly for USD to rebound back to highs anytime soon; however, a wave B could be close.
If dollar is going to continue downtrend, I want to be long gold, at least until DXY is close to 50 fib level. If DXY is finishing wave A of correction and wave B is starting, I want to be long USDJPY. If dollar weakness comes, I'll increase long gold exposure. If dollar strength is confirmed, I'll increase USDJPY exposure.
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Fundie/macro opinions backing a USD bear bias and my temptation to call bottom in stocks (feel free to ignore the following paragraphs): The employment report today was important. The path to lower inflation and interest rates WITHOUT having to deal with painfully high unemployment/lower GDP/EPS, is becoming clearer. In other words, the odds for a "soft land" in America have increased significantly IMO.
The FED has expressed fear over an inflationary "wage price spiral (WPS)" countless times. Some knowledgeable people believe WPS is a BS myth (a can of worms I won't open) and today's employment report evidenced this belief. Wage inflation was lower than expectations while the unemployment rate dropped back to 3.5% from 3.7%.
So, the last CPI and PPI reports surprised to the downside, GDP expectations remain in the positive, unemployment is remaining near record lows, AND wage inflation is surprising to the downside. This leaves FED hawks with much less ammunition, as it appears their job is done. The FED can't justify thier goal to put millions out of work with excess rate increases.
The only somewhat solid hawkish narrative left for hawks: any FED dovishness will cause commodities to skyrocket, long-run inflation expectations rise, CPI gets stuck at 4-5%, inflation becomes entrenched, and the FED loses all credibility. This argument probably has some logical weight, but only because there's severe systemic supply shortages in certain commodities which is the main argument made by commodity super cycle believers.
My core belief on the topic is that monetary policy is mostly psychological and not nearly as impactful as mainstream consensus suggests, so the fear of commodities having a sustainable rally to new highs because of a lower yields could be unreasonable IMO. Covid lockdowns, Ukraine, and fiscal stimulus were the root causes behind the commodity boom. Historically speaking, similar inflationary periods were resolved relatively painlessly in 2-3 years, the best example being post WWII. Commodity super cycle believers might be crazy doomsayers by the end of 2023.
I have high conviction a soft landing NARRATIVE will gain widespread traction in Wall Street and will continue until data suggests otherwise. It could actually become reality, not narrative, an outcome many consider to be low probability.
Again, I'm not blindly bullish gold/bearish USD. I'm attempting to go long a makeshift XAUJPY pair at ideal entries. I'm not super confident long XAUJPY will even work, and if it doesn't, my sizing and stops will protect me from unacceptable losses. The idea is to stay nimble and have an open mind. USD is already down massively from 2022 highs, and gold is already up significantly from lows. That being said, I'm trying to follow the trend. DXY is still up massively from 2021 lows despite the recent pullback, and gold is far from ATHs, so I believe the USD bear trend has room, especially if news continues to be bearish USD. I think the probabilities have decreased significantly for USD to rebound back to highs anytime soon; however, a wave B could be close.
If dollar is going to continue downtrend, I want to be long gold, at least until DXY is close to 50 fib level. If DXY is finishing wave A of correction and wave B is starting, I want to be long USDJPY. If dollar weakness comes, I'll increase long gold exposure. If dollar strength is confirmed, I'll increase USDJPY exposure.
-----------------------------------------------------------------------
Fundie/macro opinions backing a USD bear bias and my temptation to call bottom in stocks (feel free to ignore the following paragraphs): The employment report today was important. The path to lower inflation and interest rates WITHOUT having to deal with painfully high unemployment/lower GDP/EPS, is becoming clearer. In other words, the odds for a "soft land" in America have increased significantly IMO.
The FED has expressed fear over an inflationary "wage price spiral (WPS)" countless times. Some knowledgeable people believe WPS is a BS myth (a can of worms I won't open) and today's employment report evidenced this belief. Wage inflation was lower than expectations while the unemployment rate dropped back to 3.5% from 3.7%.
So, the last CPI and PPI reports surprised to the downside, GDP expectations remain in the positive, unemployment is remaining near record lows, AND wage inflation is surprising to the downside. This leaves FED hawks with much less ammunition, as it appears their job is done. The FED can't justify thier goal to put millions out of work with excess rate increases.
The only somewhat solid hawkish narrative left for hawks: any FED dovishness will cause commodities to skyrocket, long-run inflation expectations rise, CPI gets stuck at 4-5%, inflation becomes entrenched, and the FED loses all credibility. This argument probably has some logical weight, but only because there's severe systemic supply shortages in certain commodities which is the main argument made by commodity super cycle believers.
My core belief on the topic is that monetary policy is mostly psychological and not nearly as impactful as mainstream consensus suggests, so the fear of commodities having a sustainable rally to new highs because of a lower yields could be unreasonable IMO. Covid lockdowns, Ukraine, and fiscal stimulus were the root causes behind the commodity boom. Historically speaking, similar inflationary periods were resolved relatively painlessly in 2-3 years, the best example being post WWII. Commodity super cycle believers might be crazy doomsayers by the end of 2023.
I have high conviction a soft landing NARRATIVE will gain widespread traction in Wall Street and will continue until data suggests otherwise. It could actually become reality, not narrative, an outcome many consider to be low probability.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.