The charts that matter – is it turnaround time for the dollar?

It’s been another potentially significant week for most of our ‘charts that matter’. Gold took a bit of a knock again this week as the US Federal Reserve’s decision came out as being a little more hawkish than anyone had expected.

On the face of it, the Fed didn’t do anything particularly surprising. The market had expected the Fed to announce balance sheet “normalisation” in October. But it was a tiny bit more punchy than that – there’s still a feeling among those on the Fed’s rate-setting committee that it’ll raise interest rates at least once more this year.

The market tends to lean towards expecting the Fed to surprise on the dovish side rather than the hawkish side, So that made for a stronger dollar.

Gold

As a result, gold’s fallen down through the $1,300 an ounce mark again.

(Gold: three months)

US dollar

(DXY: three months)

Meanwhile, the US dollar index has perked up significantly. Is this a turning point for the dollar? It’s one of the most important prices in the world, but if it does start to rise significantly, then the already-expensive US stockmarket could be in trouble (S&P 500 companies make a lot of their earnings around the globe – when the dollar goes up, their products become a little harder to sell and earnings fall under pressure).

This is vital to watch – a blip higher is one thing (the dollar has fallen a lot) but if this is a genuine long-term shift higher, then it could make a big difference to markets across the world.

US Treasuries

(Ten-year US Treasury bonds: three months)

As investors started to re-evaluate the chances of rates rising again, ten-year US Treasury bond yields perked up a little.

Copper

(Copper: three months)

Copper is still on a breather. It’s fallen harder than I expected and it’s interesting to note that it hasn’t taken a lot to get the market extremely bearish on it again. To me that’s a good contrarian sign that the market psychology remains sceptical of the inflation story, which in turn means it’s the one thing that we really should be watching out for.

Bitcoin

Bitcoin is still proving to be the Teflon asset. It’s rebounded somewhat from its slide to $3,000, despite ongoing concerns about China’s attitude towards the cryptocurrency (my colleague Charlie Morris – who has a far better understanding of bitcoin than the vast majority of people I know – writes about cryptocurrencies and why they are here to stay in  MoneyWeek magazine this week).

US jobless claims

The weekly US jobless claims are still being disrupted by hurricane activity again, but again it’s not proved as bad as markets expected. This week, the four-week average jumped to 268,750 as claims came in at 259,000. That was a good bit lower than the 300,000 expected.

According to David Rosenberg of Gluskin Sheff, when US jobless claims hit a “cyclical trough” (as measured by the four-week moving average), a stock market peak is not far behind (on average 14 weeks), and a recession follows about a year later. If 20 May holds as the cyclical trough, then if Rosenberg is right (and to be fair, it’s a small data set) we might already have seen the stockmarket peak, but I’d withhold judgement for now.

Oil price

(Brent crude oil: three months)

Chart number seven is the oil price (as measured by Brent crude, the international/European benchmark). Oil has headed higher again this week, partly due to hurricane disruption and partly as a side effect of the falling dollar. What’s interesting to me here is that oil has just steadily crept higher and it’s fair to say that no one is paying a lot of attention to it.

My colleague Dominic wrote about this phenomenon in Money Morning earlier this week and I have to say that while I have no strong desire to invest in oil right now, the charts do seem to be going oil’s way.

Amazon

(Amazon: three months)

Finally there’s Amazon. As the wider US markets remain close to record highs, Amazon remained well off its August high. The political attitude towards the big tech stocks is starting to sour (as my colleague Merryn discusses in this week’s MoneyWeek magazine) and this showed up in Amazon’s share price this week.