Head and Shoulders
It may seem counter-intuitive but the US dollar appreciated last week, despite the partial closure of the Federal government, the heightened risk of default and the nomination of Yellen. The dollar can move higher next week too.
Looking at the equity market and some of the background dynamics Citi's FX Technical group cannot help but be reminded of 2011. They also warn, despite the constant hope-driven rallies this week, there are also some aspects of what we saw in 1998 and similarities with 2000 that are worth noting. The bottom line, we have had the view for some time that we would see a much deeper correction in the equity market (in excess of 20%). Recent price action and developments might (just might) be suggesting that it is time to revisit that theme.
Across asset classes, BofAML warns that financial markets suggest that this week will see a continuation of the risk off theme from last week. The breakout in the VIX says that investor anxiety wiil remain elevated, particularly as the S&P500 remains on track to test 10 month trendline support at 1657. In such an environment, safe havens such as US Treasuries should benefit with a target 2.544%/2.459% resistance.
Overview of near-term dollar outlook.
The markets seem to sense that all of this. In the US we’re putting in what looks like a lower high. The market appears to be forming a Head and Shoulders pattern.
The past few weeks have seen the tech and business media abuzz about a not-so-little warehouse in Tennessee. That's because this distribution center, opening its doors with a burst of fanfare and even a few visits from nearby politicians, isn't a jumping-off point for Macy's or Target. Instead, the warehouse is the latest in a series of new locations being opened by retail technology giant Amazon.com. The jobs this new mega-warehouse is purported to create: 5,000. However, as we discuss below, for every job Amazon "creates," four other jobs go away at a company like TJX.
On a day when the underlying reason for celebration in the US is often washed away by a few gallons of alcohol, we thought it timely to see just which states are the biggest soaks. It is likely no surprise that Utah is the driest state but the top 4 states seem head and shoulders above the rest with North Dakota topping the list at 45.8 gallons of beer per capita per year (or an average of just over 1 pint per day - which seems very reasonable?).
Few analysts know or admit it, but the only thing that held Europe (and ultimately the financial system) together since May 2012 was the promise of unlimited bond purchases from the ECB.
A look mostly at prices in the currency market and the outlook.
An oveview of the technical condition of the major currencies. Offered as a compliment to macro analysis.
An overview of the technical condition of the major currencies. See why we anticipate a heavier US dollar in the week ahead.
A weekly overview of the technical condition of a number of currencies against the US dollar. It is meant to compliment and supplement fundamental analysis. We retain a mostly favorable outlook for the US dollar, though skeptical of the scope for additional significant gains against the Japanese yen.
The United Stated economy is hanging on tight in preparation for the looming apocalypse that is the fiscal cliff. Just feet from the edge and a decision was made to… You guessed it, push back the deadlines. You know that progress is weak when the U.S. Government keeps coming to the conclusion that the best decision is to remain in a state of indecision.
For those who want to get a sense of who the leading candidate in Italy is, at least based on concurrent mentions on Twitter, here is an application that tracks candidate references in real-time. Needless to say, Grillo and Berlusconi are head and shoulders above the rest.
Here is a weekly over view of the currency market from a technical perspective. The divergence between the performance of the dollar against the euro-bloc, with the exception of sterling, and the other major currencies is noteworthy. In the analysis, I suggest a few opportnities for near-term contrarians. I fully appreciate that some readers eschew technical analysis and regulate it to the same space as numerology and witchcraft. Yet, even still, it is useful to recall Keynes' view that the markets are like a beauty contest and the trick is not to pick who one thinks is the most beautiful, but to pick who others will think most beautiful. Moreover, technicals allow one to quantify how much one is willing to lose in a way that fundamental macro-economic analysis doesn't. It is a tool then for risk management.