Australian Dollar

The US dollar's run stopped last week, but not before new highs were recorded against the euro, sterling, and the yen.   By the end of the week, the euro had risen 1.4%, sterling 0.9%, and the yen had risen as much as the two of them put together.  It was the biggest weekly gain for the yen in 16-months.  

There is one pressing question that international investors will be mulling this weekend:  How far and how long is the dollar's correction?   

Deny it.  Engage in all kinds of mental gymnastics to dismiss it if you must,  but the fact is the US dollar is rising, and not just because of negative developments abroad, but positive economic developments in the US.  

A look at the global capital markets as if analysis matters.

Since May, CEO confidence among America's largest companies had stagnated - even as stocks did what they do and rise, rise, rise. That changed when Bullard (now explained as "misunderstood" by the market) set fire to stocks with his QE4 hints and Plunge Protection Team rescue. However, the last 2 weeks have seen a noticable collapse once again in CEO confidence, according to Bloomberg's Orange Book index, even as stocks reach new higher all-time-er highs. As Bloomberg's Rich Yamarone notes, recent earnings calls highlight the headwinds companies face: Executives cite “softness in consumer spending,” a “challenging” climate, “fairly stagnant economy,” and “cautious” optimism. Currency valuations are front and center.

Contrary to the death of the dollar chatter, the US currency continues to appreciate.  Here's why there is still punch left in the bowl.  

The monetary tectonic plates are shifting, and predicting the next global financial earthquake is relatively easy.

A look at the price action of the dollar, S&P 500 and US 10-year yields as if analysis matters. 

What if global capitalism is not about to collapse?  What if the sun rises next week, and the great apocolypse called for and predicted does not materialize yet, what then for the dollar?  

When Calpers buys an international asset for its investors, is it intervening in the forex market on behalf of the US?

A look at the currency market as if analysis mattered.  

Overview of the capital markets as if they were not managed by an evil cabal.

No heavy ideological axe to griind or conspiracy theories to propound, just a simple look at the price action in the capital markets.

While some are focused on the demise of the dollar, the fact is that it has been appreciating and this is causing some confusion.  See if this helps clarify what is happening. 

The last note briefly addressed the benefits associated with the reverse repurchase facility (RRF). Indeed liabilities have increasingly moved from bank balance sheets to the Fed, freeing lending capacity. One must recall reserves are not fungible outside of the banking system (but can act as collateral for margin). With flow decreasing, the opportunity for small relative volume bids spread over a large quantity of transactions (most instances per unit time) decreased with market prices in many asset markets. Is more downside coming?

The may be secret agreements and a grand conspiracy to manipulate the capital markets and commodities, but they are still largely understandable through rational analysis.  Not being privy to such secret deals, here is one man's view of the near-term technical outlook for the foreign exchange market, bond, commodities and stocks.