Technical Indicators

Overview of market positioning and technical indicators on the eve of the FOMC meeting.  

While the perma bears may find comfort in the dollar's decline, its weakness has not been very broad, but really limited to the euro, sterling and currencies that move in their orbit.  Still further dollar declines look likely near-term.  

Overview of the near-term outlook for the major currencies.  

An overview of the near-term US dollar outlook.  Not thinking it is crashing and burning next week simply because it is not backed by gold or because the Fed is engaged in QE.  

As suggested here last week, the dollar moved higher over the past five sessions.  Although it finished the week on a firm note, I suspect we may have a pullback before seeing higher levels.    Here is why.

Just when the dollar's last rites were being considered, it has bounced back and looks poised to move higher in the days ahead.

If mere hope of an "imminent" deal starting on Thursday and continuing through Monday, with no actual deal but who cares about details, was enough to push the DJIA up by 600 points, then all it would take to set a new record market high today, is for another day to pass - one day before the October 17 X-Date when one Senator can filibuster the US through the deadline on their own, and when the House still has to have a voice on what the Senate has been doing - without an actual debt deal. After all, the market is so "centrally-planned" all that is needed is knowledge that Bernanke will get to work, and is getting to work to the tune of $85 billion a month, mixed in with some hope. And with today's "market for idiots" facilitating POMO of over $5 billion which guarantees a green close, all that is needed is a complete failure in talks for the SPX to go limit up on even more hopes things will be fine any second now... if not right now.

Technically, the dollar is looking a bit better.  Here is our assessment.

Overview of near-term dollar outlook.

Even if one correctly predicts what the FOMC does next week, getting the direction right for dollar is a different matter.  The markets are anticipatory in nature and the effect often takes place before the cause.  

Financial circles in Hong Kong are buzzing today on the new Goldman Sachs projection that gold may drop below $1,000 an ounce. The central thess: since the US economy is out of the woods, there’s no longer a need for gold as a risk hedge. But as one senior-level manager at a major investment bank noted, "Nobody knows what the f**k is going on..." However, this mentality entirely misses the point of precious metals. When the hopes and dreams of the entire global financial system rest on the lies of politicians, the whims of central bankers, and the mountains of debt they have all accumulated, things could turn on a dime... tomorrow. Gold is an insurance policy. It’s a form of money that you might never need to use. But should that need ever arise, you’ll be so much better off for owning it.

Price action in the foreign exchange market in the context of fundamental developments.  Disappointing US jobs data clouds the near-term outlook for the greenback,  

Quick, dispassionate overview of the fx market.

Anticipation of Fed tapering is being cited for both dollar gains and dollar losses.  What gives?

A brief discussion of the technical condition of the major currencies going to what is a week packed with fundamental developments.