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Dollar Bulls in Drivers Seat
You go to a casino and meander over to the roulette table. It shows eight reds in a row. What do you do, knowing full well that each spin is an independent event, but also cognizant that probability argues against very long streaks too? Do you bet "red" that the streak continues to an even less probable nine, or do you bet on "black"?
The euro has completed its eighth consecutive week depreciating against the dollar. This is the longest such streak in its relatively short history.
The short-term speculative market has amassed a significant short euro position. Although the ECB may have surprised many with the rate cut and the clear commitment to ABS/covered bond purchases, the market has anticipated an increasing divergence between the US and euro area in terms of economic performance and monetary policy.
However, the supportive news stream may have peaked until the FOMC meeting and launch of the TLTRO. The German factory orders and industrial output data were significantly stronger than expected. This suggests the euro area's largest economy is not about to slip into a recession despite the contraction in Q2 GDP. It also points to a favorable euro area aggregate figure on September 12 (upside risk to the consensus forecast of 0.6% after -0.3% in June). At the same time, the weakest net job creation in the US this year may temper enthusiasm that had been building for an earlier start to the US rate cycle. A truce in Ukraine would also be consistent with a modest shift in the news stream.
Given the medium and longer term fundamentally driven euro bearishness, how much of a bounce can be reasonable expected. Technically, the $1.3000-50 area needs to be overcome to signal a correction, we suspect, instead of a consolidation phase. On the downside, the next big target is just below $1.28.
The less extreme positioning in sterling and the looming Scottish referendum may mean that sterling lags behind the euro during the days ahead. In fact, while the euro was collapsing against the dollar in response to the ECB's announcement, it did not make a new low against sterling. Its two-year low was set in late July. The euro could test the upper end of its recent range near GBP0.8000. Against the dollar, the $1.6400-20 area may cap initial upticks.
The dollar's advance against the yen accelerated since the JPY103 cap was broken on August 20. It recorded a new five-year high near JPY105.70 before the weekend. It too appears to be exhausted on a short-term view and the the RSI did not confirm the new dollar high. Support is seen in the JPY104.35-65 area.
The Australian dollar was the strongest major currency in the past week, gaining about 0.6% against the US dollar and a little more than 2% against sterling, which was the weakest of the majors. However, with the pre-weekend gains, it is approached the downtrend line drawn off the early and late July highs. It comes in near $0.9400 at the end of next week. This also corresponds with the 61.8% retracement off that July 1 high just above $0.9500. At the same time, the it closed just above the upper Bollinger Band, which also seems to warn against chasing it.
The Canadian dollar's flat showing was sufficient for it to be the second best performing major currency last week. Disappointing jobs data and IVEY survey offsets the larger than expected trade surplus reported earlier in the week. The US dollar looks comfortably in a CAD1.08-CAD1.10 range. If the larger consolidation that we anticipate pans out, the Canadian dollar may under-perform on the crosses, especially the euro and currencies that move in its orbit.
For almost a month, the US dollar has been confined to a MXN13.04-MXN13.17 trading range. The technical indicators are not generating strong signals. The upper end of the range was tested three times last week, and the dollar finished the week near the lower end of the range. We are more inclined to see some further dollar weakness in the days ahead. An uptrend line drawn off the June and July lows comes in near MXN13.02 next week. A convincing break of it, which means a break of MXN13.00 would be needed to ease the disappointment of the peso bulls. The peso is flat against the dollar this year. Many, including ourselves had expected a stronger showing.
We suspect the US 10-year yield has bottomed. The actual yield low was set on August 15, the 43rd anniversary of the end of Bretton Woods near 2.30%. Technical indicators are constructive, and the five-day moving average crossed above the 20-day average at the end of the week. The down trend line drawn off the July and August highs comes in near 2.49% at the end of next week.
The technical tone of the S&P 500 has softened, and additional losses appear likely in the days ahead, which dovetails with our consoldiative theme. The record high set on September 4 was not confirmed by the RSI. Immediate downside potential extends toward 1978 and then 1970. Lastly, oil prices and commodity prices, more generally continue to struggle to sustain upticks.
Observations based on the speculative positioning in the futures market:
1. There were two significant position adjustments (10k contracts or more) in the CFTC reporting week ending Sept 2. The first, gross short euro position increased by 16.2k contracts to 220.1k. The record gross short position was set in June 2012 near 251k contracts. The second, the gross short yen position increased by 10.4k contracts to 132.8k. At the end of last year, they stood at 158k contracts. The record was set in June 2007 near 237k contracts.
2. Nine of the 14 gross positions we track changed by less than 5k contracts. Market interest is highly concentrated short euro and yen positions. However, we note that the largest gross long positions are in the Australian dollar, with 77.1k long contracts in speculator hands, closely followed by the Mexican peso's 75.2k contracts.
3. With the exception of the Canadian and Australian dollar, speculators added to gross short positions. There was less of a clear pattern in the gross long positions. The euro, Swiss franc, Australian dollar and Mexican peso saw gross longs increase.
4. After flipping to the long side for the first time in a year, the net speculative position in the 10-year futures contact swung back to the short side. A combination of longs being cut by 35.6k contracts (to 382.4k) and 55k new short contracts (to 465.1k) saw the net position shift to almost 83k short contracts from just less than 8k long contracts the previous reporting period.
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I've been saying this for months, dollar will strengthen before the big kaboom, now I really wish I had written a blog post about it before-hand and spammed the comment sections of ZH with it...
But I get tired of douchebags who do that.
The dollar will advance for quite a while as debt destruction bolsters the necessity to pay down dollar denominated credit. Historical update...
http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-historic...
That is the funniest thing ive read all week.
Did the Euro rise in 2010 when the economy was faultering ? Nope
Will the USD rise when the economy faulters ? Nope
http://freegoldobserver.blogspot.ca/2011/10/forgotten-crisis-and-what-ev...
The USA reached maximum potential inflation in 2008...the supply of US dollars are being cut off in relation to the demand.
The primary dealers of the federal reserve account for over 70% of teh trading done on Forex...or money changers.
The USA has been imploding and cutting off economic zones from US dollar inflation...it's why you see all the sanctions being imposed and cover revolutions being ignited globally.
The dollar is fucked. Get a grip FX traders.
Doubtful in the near term.
Meanwhile ,the real news:
BTC/USD
After facing a huge $53 fall this week, the BTC/USD once again attained a consolidating range, suggesting neither a bullish or bearish behavior. During the 9/3 trading hours, the BTC/USD opened at around 476 and closed near 477 at the end of the day. In-between, the pair saw a reasonable pump-and-dump as well, suggesting an attempt to drive the market towards another peak. But we have earlier seen the similar attempts, resulting eventually into failed trendlines.
In the meantime, the Bitcoin market further met some really optimistic news from around the world. The deal between two Indonesian businesses – one a Bitcoin exchange, and other a major department store – expanded digital currency’s reach to over 10,000 local stores. Other morale-boosting news included Google policy advisor and favoring Bitcoin and the launch of Crypto 2.0 to strengthen it.
At press time, the BTC/USD has jumped 0.42% in last 24 hours and is currently being priced at 482.56.
LTC/BTC
Finally, Litecoin has its own reasons to surge rather than just tailing Bitcoin’s neutral phase. In one of the biggest announcements, renowned travelling planning company Cheap Air announced that they will start accepting Litecoin as one of the payment methods. Following the announcement, the Litecoin market saw a reasonable positivity – something that was missing from a very long time.
The LTC/BTC opened at 0.01007240 while trading during the 9/3 sessions. It though remained in a stiff trading range upon finishing half the day, but rocketed right after the announcement made by Cheap Air, reaching 0.01070550 during present session.
money or coinage started out as a food substitute.
food is power.
the true medium of exchange is power
credit is a derivative of money
bitcoins are a derivative of credit.
only around 3% of US credit market debt is composed of banknotes...the other 97% is composed of electromagnetic polarity differentials on hard disk platters.
Or bits of information which is what bit coins are.
So you have bits of information being exchanged for bits of infornation.
With the hope that the new bits of information increase in value in relation to the previous bits of information.
Bitcoins are basically a computer game.
Like chinese gold miners in world of warcraft.
It's just a Mania....like an internet stock with no profits...you all have been fooled into thinking cryptocurrencies are worth something...and because you all believe the lie promoted as Truth is truth...You all are supplying the power to it to sustain the lie's appearance as truth.
Tulips are ultimately worth more than bitcoins or all the rest of the figments of peoples imaginations believed to be valuable.
"bits of information which is what bitcoins are" - Wow, so sad. Learn something about the new technology before you start screaming "tulip bulb mania" like all the other ignorant fucks out there.
Given that so much commerce takes place over the internet, nothing makes any sense as a medium of exchange anymore other than crypto.
Go ahead and hold onto your ancient ideas, as you attempt to blow gold dust through the internet, which you must believe is just "a series of tubes".
I may sound like a bitcoin shill, but that's because I want people to recognize the value of a decentralized currency that has the potential to render central banks obsolete, and end this madness once and for all.
The entire Internet is a massive computer game.
And computer games have serious value - the combined value of the global Internet probably now has a value well into low hundreds of trillions , and growing every day. All it lacked was it's own currency , which now exists. You are cluless as to what is taking place here.
"Clueless" might be an understatement. More like delusional.
I bet on the gold streak!
I bet ZERO.
Bossman:
Let's all use the Thai Baht as the reserve. After all its pegged to the dollar too. All is gonna be well.
sarc/
Watch Bardabunga daily.
Haven't checked on Fluor recently but they are a party to the biggest nuclear waste clean up ever successfully undertaken.
What about the bullshit collapse of the dollar its a game I can see! Each country takes a turn devaluing its currency so none ever will collapse the pundits are full of shit. FEAR MONGERS
In 5000 years of history the average life-span for any Fiat currency is around 27 years.
It is a mathematical certainty that the US Dollar will fail - unless pegged to something other than debt.
So , go figure that one.
There is a 2% bias built-in any closed currency exchange path .
See http://andreswhy.blogspot.com/2008/10/financial-crisis-2008-exchange-rat...