How does the above relate to the forex market?
The USD Index (the above chart features the UUP ETF, which is a proxy for the USD) could still move lower before turning up again – the October and November lows could be touched, but we think that a confirmed breakdown below them is not likely. The USD’s decline is likely to result in an upswing in the precious metals sector, so the above chart more or less confirms what we wrote earlier today.
The USD is close enough to the previous lows to reach them within just one or two sessions, but at the same time it’s far enough for the decline to these levels to take several days. Based on the way the USD declined in October, the former is more likely.
Summing up, the medium-term outlook for the precious metals market didn’t change based on last and this week’s developments and it remains bearish, but the short-term outlook is bullish. Yesterday’s strength in mining stocks and the lack of it in silver serve as bullish confirmations. Given these additional bullish signs, we have decided to increase our initial target levels for mining stocks and related ETFs in order to increase the profitability of our current long positions in the precious metals sector.