“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


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Friday, November 14, 2014

U S Dollar Stuck Just Below 88.50

The US Dollar has been on an amazing bullish tear higher with the currency being the beneficiary of a roaring stock market and the sentiment that if any industrialized nation in the globe is going to raise interest rates, the US will be the first to do so.

The currency has rallied more than 10% since early May of this year, a pretty impressive feat no matter how some keep trying to dismiss it. As it has rallied, gold has moved lower, creating a very good inverse relationships that the market has been comfortable with.



The Dollar however is running into some selling resistance noted at the uppermost resistance level noted on the chart just shy of the 88.50 level.

Can you see the stair-stepping pattern that has been forming on the chart? During the initial phase of the current bull market in the Dollar, the currency displayed some resiliency near 79.50 - 79.00 that sparked some buying among technicians who noted the bottoming action. When it broke out above resistance near 81.50, instead of setting back somewhat as many markets are prone to do as they digest their gains, the Dollar merely tracked sideways for a very brief period before it rocketed higher supported by overwhelmingly strong fundamentals.

It then stalled out near 84.50 where it consolidated a bit further before embarking on yet another leg higher. That rally took it all the way to just short of 87. The greenback set back and retreated all the way to the former resistance zone which served as downside support.



From there it encountered another wave of buying which took it all the way back up to 87, which it obliterated, soaring to its recent high near the 88.50 level, where it is currently consolidating some more.

As chart technicians, we are now watching to see whether this is just another pause in the relentless move higher in the greenback or the beginning of a deeper move lower. Thus far, the available evidence points to this as merely another pause. However we need to stay vigilant as always.

The fundamentals that have driven the Dollar higher against the majors are still in place. the current "Long Dollar" trade has gotten a bit crowded with specs heavily net long. Perhaps some of what we are seeing today in the Forex markets is some correcting of that imbalance. For now, as long as the Dollar remains above 87.00 on a closing basis, it looks like the pause that refreshes.

Time will tell...let's see what we get next week....



15 comments:

  1. I have to say, though I'm usually the first to ridicule bear market rallies, this move in metals feels different to me. Silver is $1.10 off it's overnight lows.

    I don't have any money bet on it, but this move just feels different to me. Impressive.

    Though really, if we can get a "12" handle back on gold, I've got some coins already picked out to sell into it. So I'm not hardly turning bullish. Just happy to sell at a little better price.

    ReplyDelete
    Replies
    1. Eric Original;

      Yes, I have that same feeling as well. I put out a short line at $1190 and covered it after a small profit but I did expect the market to give up some more of these gains.

      We'll see what we get next week but maybe we need to just get past that Swiss gold referendum thing for the trend to reassert itself.

      I find it hard to believe that the public will vote yes on that as it will effectively kill their export markets since the SNB will not have the ammunition to be able to maintain its current Euro peg near 1.20- That will mean lost jobs for the Swiss people as their exports will lose any competitive edge they might have.

      We'll have to see which side wins out. Honest money is a good thing but in a world in which all your neighbors are free to let their currency float up and down, and one is trying to maintain a peg, it is next to impossible to compete.

      This might be a lot like the Scottish independence vote. All of the pollsters were calling it close and it then turned out to be a blowout against the independence movement. Once people understand the downside they might feel otherwise. We'll see however.

      Delete
    2. Trader Dan -

      There is NO way the Swiss Referendum vote will go through. Even if the public were to vote it through, it also needs to be ratified by the Cantons (Swiss State governments) -- and they are almost guaranteed to shoot it down. The Cantons would lose the dividend payments they are currently getting from the central bank.....which makes them very unlikely to be pleased with this referendum. Here is an excerpt from Forbes:

      "Barclays added that even if the referendum does win the popular vote, the initiative still has to be passed by the majority of 26 Swiss Cantons – the different regions in Switzerland. The analysts said because of the government’s and central bank’s opposition to the gold initiative, it is unlikely to break this “insurmountable barrier.”

      Delete
    3. eric webber;

      Thanks very much for that info eric. that is very informative and most appreciated!

      Delete
    4. It's possible gold and silver get an end of the year bump up like we've seen in previous Decembers. It's hard to say based on just today' spike up when we saw something similar in the metals just last friday.

      The bumpiness in the EUR zipping up and down quickly between 1.24-125.5 coupled with the yen going nuts lately I think is what we're seeing for the most part.
      Just wait until the yen hits 120 and we'll see where we're at.
      If the yen continues to weaken and gold starts to climb I'd have to consider that some type of trend is underway.
      Gold has generally fallen as the yen has weakened...except today. The yen plummeted last night yet gold didn't fade as it's been prone to do lately.

      I'm also wondering what effects the opening of the Hong Kong markets to full outside investor access (to Chinese stocks/bonds) will have going forward insofar as large shifts in capital flows moving around differently then before when HK wasn't fully accessible like it was before today.
      Big money is surely going to start flowing there at times from different markets and currencies.

      Delete
    5. The swiss franc would devalue as more gold is accumulated, more swiss francs chasing the same amount of goods. Unredeemable gold in a government vault does not have an effect on the value of the currency.

      Delete
    6. Gold does not back currency ever, that is the big lie the crime syndicate propagates.

      Delete
  2. Thanks for your thoughts on this.
    If you look back at a 5 year DXY chart it appears this fairly sudden USD rise towards the mid 88's is close to the peak in the DXY in mid 2010 which looks to be closer to 89 or more back then.

    I'm not suggesting that line of resistance is still in play or why the EURUSD went banannas earlier as it approached that resistance zone.
    Looking back 5 years on the DXY is something I've been keeping my eye on lately as we starting approaching DXY levels not seen since that top back in 2010.
    Interesting, if nothing else.

    ReplyDelete
  3. wowo, the inverse continued but now it's DX down GC SI even CL up_ski!

    GC high o day the 20-dsma touch, and resistance at at $1194 (given by the 50% of 1131-1255) and into the 1200 round number.

    soybeans daily chart 'alternation' again with last 6 sessions up down up down up down... alternation is one indicator for a trend ending.

    Settlements #Hogs: Z 92.675 up 1.40,
    #Feeders: X 240.00 up .65, #Cattle: Z 170.20 up .55.

    Meal drags beans, corn lower at close; meal dn $14.10, beans dn 31, corn dn 4, wheat up 7, KC up fractionally, MN up 5.

    all right, make sure you take at least 24hrs off continuous- no computer, no work... lookn forward to the pre-open research sunday!

    TGIF!

    ReplyDelete
  4. stk mkt the best-performing areas this week have been the Nasdaq Composite (+1.0%), helped in large part by a 4.2% gain for Apple (AAPL 113.61, +0.79), and the Dow Jones Transportation Average (+1.2%), which continues to draft off the decline in oil prices.

    Oil has rebounded today (+1.4% to $75.26/bbl), yet prices have come down roughly 30% from their mid-June high just north of $107.00/bbl.

    AAPL had a new record high market cap this week of $660bil, so anybody wanting to short the market should be watching apple.

    ReplyDelete
    Replies
    1. AAPL's market cap now exceeds the worth of the entire Russian stock market with lots left over.

      Delete
  5. VIX this week high was the 100-day sma touch, and it's just under the 200dsma of 13.98 now. so taking out this week high next week one could try to short an index or two.

    lotta 20-day SMA touches for high o day today: TLT GLD SLV HUI XAU FSF

    Soybean planting in Brazil’s Mato Grosso advances 17.2% to 84.1% complete v 93.1% last yr.

    ReplyDelete
  6. U.S. Stocks and U.S. Dollar movements of late is reflecting the absolute confidence that world investors have that the U.S. economy is on the verge of an boom of epic proportions.

    Basically, playing "catch up" after years and years of stagnation since the late 1990's.

    The pent up demand is huge.

    Confidence is improving dramatically, and soon we will see Capex and hiring explode. At that time, we might be able to see inflation start to creep up from 1% to maybe 2.5%, LOL....

    Meanwhile, the stock market will boom for 6 - 9 months after Yellen starts hiking interest rates.

    So don't be going short just yet....

    ReplyDelete
  7. Epic day to my thinking. Don't follow commodities much but the short squeeze in gold is an eye opener.

    Makets can stay irrational longer than people can stay solvent. Suspect some folks found that out the hard way today.

    Happy weekend all.

    ReplyDelete
  8. There were bargain hunters in the miners today. Unfortunately they load up and unload just as fast. Will take 30 days or more to realized their mistake and dump as the regular markets continue on up much faster.

    Everything else is only noise except for the price of oil.

    I expect Euroland banks to start propping up stocks there with little results. Buying local stocks with monies they had allotted for bond buying. It's what the Federal Reserve tries to do, monkey see monkey do.

    ReplyDelete

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