The thorn in the inflation trades’ side continues apace. That thorn is the combo of the US dollar and the Gold/Silver ratio, each of which have maintained their uptrends. Until they break down there should be no whole hog commitment to a longer-term inflation trade, in my opinion. Or at least the realization that if you do there is an ongoing negative indicator in play.
USD (DXY) looks for target #1 at 94.60 with better resistance above at 96. The Inverted H&S measurement is up around target #3 close to 98.
As with USD, the Gold/Silver ratio dropped but maintained its short-term uptrend at the daily EMA 20. I will note that RSI and MACD are not very good looking and given silver’s more constructive (contrarian) CoT view than gold’s, we can watch the GSR first and foremost for signs of a firmer, more extended inflation trade view. In other words, a breakdown here – if applicable (it’s all theoretical at this point) – could signal that the herds running into US dollars are on script (our script, anyway) but running off-sides.
As yet however, the two riders of liquidity destruction are still well in play on the short-term and as has been the case, ask for a tempered view on going whole hog inflation at this time.
