Canadian Dollar

A non-bombastic look at the week ahead in the capital markets.

At first glance, the title to this commentary seems facile, especially to those readers in higher income brackets. The reality, however, is that “investing in food” is a risk-free means of generating an annual return on one’s investment that would likely exceed the return one could earn on almost any other investment – despite the fact that nearly all other asset classes carry significant risks.

What next for the greenback?

We need to look at the concept of a reserve currency differently, because it is important. We need to look at it as a privilege and a responsibility and not as a weapon we can use against the rest of the world. If we abolish, or even lessen, legal tender laws and allow the process of price discovery to reveal the best sound money, if we allow our US dollar to become the best money it can - a truly sound money - then the chances of our personal and collective prosperity are greatly enhanced. We all have the same interest. We all want to have the highest standard of living for ourselves and our families. A sound money reserve currency offers us the best chance of achieving our shared goal; therefore, we should rally around every effort to make it so.

Dollar extends gains, defies doom and gloomers again.  

“Yes, it’s legal, but it’s just not a very nice or Canadian thing to do.“ Similarly, in Europe, an artist known as Stefanos has been defacing euro notes with images of little human figures in a painfully bleak depiction of life in Greece under austerity.

American investors might be extremely disappointed with the recent performance of the gold price as the yellow metal is once again trading below $1200/oz. This causes a lot of people to frown, but the reality is that the gold price is actually showing signs of a break-out.

and more news moving the markets

A recent business innovation that has seen wide market acceptance is the bundling of goods and services. The government bundles its products, too. However, unlike private businesses, the government gives us no choice but to purchase its one “mega-bundle”. From the viewpoint of the state, to not purchase its bundle is considered a crime rather than freedom and comes with punishments that can be extreme. Being forced to purchase the government bundle is decidedly not freedom.

• Tsipras Tamed as Economists Declare Greece Loses Austerity Fight (BBG)
• Greece readies reform plans to first sign of leftist unrest (Reuters)
• Yellen Faces Congress Amid Direst Threat to Fed Since Dodd-Frank (BBG)
• The war must go on: Kiev says cannot withdraw heavy weapons as attacks persist (Reuters)
• Ukraine fears spread of war after blast in eastern city (Reuters)
• Denmark Dismisses Report It Could Consider Capital Controls (BBG)
• Deadline Nears on Homeland Security Funding Impasse (WSJ)
• Gross Fund Hurt by Oil’s Plunge Amid Bets on Energy Bonds (BBG)

Outlook for the US dollar and other markets in the week ahead.  

Earlier today, we got a glimpse of precisely how HFTs are now making a mockery of FX "price discovery" when completely independent of any newsflow, Canadian Dollar futures cratered on what is merely the latest of many flash crashes now coming to an FX market near you.

Technical outlook in the week ahead for the dollar, 10-year yields, oil and S&P 500.

Feel like trading FX has become next to impossible, with massive, gaping bid-ask spreads, strange "tractor beams", completely unexpected stop loss runs, and - of course - central banks behind every corner? Don't worry you are not alone. According to Bloomberg, that's precisely the case as "it hasn’t been this difficult to trade currencies since the collapse of Lehman Brothers Holdings Inc. shook markets worldwide."As for the reason why, well: take a guess.

Put on the a tin foil hat if you must, but US dollar's rally is resuming after short consolidation phase.  I think the rally is only about 1/3 of where it is eventually going.