A1 Trading Company

August 14, 2023

USOil, SPX500 and USD Forecast

Frank Cabibi

A slew of monetary news is expected around the world today. Today, we will focus on three assets that may start seeing some changes in price action in the following days. Here is my analysis on USOil, SPX500 and USD as we enter into a new week.

EdgeFinder Analysis

At +6 "Very Bullish", this commodity is something worth considering to the long side. COT seems to be buying up more and more long contracts over the span of several weeks. It is now the most longed asset on the EF as well as over 75% long. The currency pair bias shows a steady increase in net bullish positioning since early July.

Pakistan's recent halt on Russian imports and China's economic struggle have brought recent downside to prices. However, rising CPI y/y in the US and expected rise in global inflation are also a good sign for the bulls, which price is in direct correlation with inflation. As long as USOil can stay above this support level, it seems like price could test back up at the highs.

The SPX500 is on some major support to start a week of big retail earnings. Walmart and others are to report in the next few days which could be bringing in a whole new wave of volatility. Struggling with the 2 year bond yield rise, stocks are under pressure. However, COT shows us something that may counter act the recent selling pressure on the indices.

Smart money is buying up long contracts, meanwhile covering a hefty amount of shorts from last Friday's report. Because of the long term uptrend, this index looks to be in another healthy pullback. In a similar case to oil, price needs to stay above this trend line to remain bullish. Otherwise, price could retrace to even lower levels.

The dollar looks incredibly strong right now as a result of higher CPI y/y and unchanged CPI m/m. On the EdgeFinder, the pair is ranked at a -9 "Very Bearish" reading. Lots of factors outside the US go into this play for those looking to short. Technicals are strongly opposing any sign of upside. Retail positioning is also long in the majority and COT is more net bullish dollar.

However, RBA meeting minutes and inflation news comes out this week. So, we will get some insight on what Australia's central bank plans to do for the Aussie going forward. In addition to that, wages are expected to rise, thus causing a hinderance on the target goal for 2% inflation. We will see if the RBA will continue to hike rates with concerningly high inflation numbers at 6%.

Retail Spotlight

On the retail side, indices are mostly short, oil is heavily short, even UJ is shorted by most crowd participants. On the other side, gold is majority long, AU is long, and USDCHF is long.

Smart Money Spotlight

What we see now is oil being the most bought asset on the EdgeFinder. With an increase of over 15k long contracts. The SPX500 saw not only a jump in long contracts, but shorts are getting covered as well. AUD is also net long on a positional bias this week in term of weekly change. Meanwhile, the dollar looks to be losing its grip in term of demand.

Fundamental Spotlight

Here are the inflation rates of AUD and USD. As you can see, Australia is hurting from higher levels of CPI. Last week's rise in CPI for USD was a bullish sign for dollar investors, however, it's now Aussie's turn with wage inflation numbers which are expected to have risen 0.1% on a quarterly basis.

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