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Is The Long Dollar Trade Over?
Submitted by Derrick Wulf of No Easy Trade
Is The Long Dollar Trade Over?
It seemed almost too obvious. The European Central Bank was imposing negative interest rates and devising new quantitative easing schemes to combat the growing threat of deflation; the SNB was buying foreign currencies in "unlimited quantities" to cap the value of the Franc; the Bank of Japan was madly printing Yen in a desperate frenzy to finally stir up domestic demand; and then the Bank of China responded with its own rate cuts. All this, while the Federal Reserve was quietly ending its quantitative easing policies and even hinting at forthcoming (2015) rate hikes.
The long dollar trade, and all it's various expressions, soon became one of the most crowded trades of 2014. Investors were not only long the dollar against euro and yen, they were short gold, silver, copper, and commodities in general, even using the dollar to help justify late-cycle crude oil shorts in recent weeks. Investors were also long stocks, as all these freshly printed euro, franc, and yen would inevitably seek out "greener" pastures abroad.
But the dollar rally has started to lose momentum, and with year-end approaching it might not be surprising to see some investors take a bit of risk off their books. Many of these investors still have decent profits in their long dollar expressions, but the huge reversals in gold and silver yesterday may provide a bit of a warning to those still in the trade. Moreover, with liquidity in the financial markets a mere shadow of what it used to be, waiting until Christmas to trim positions might not be the most prudent strategy for institutional managers. This turkey is cooked, and it's time to give thanks.
Now a few charts. First the dollar index, which looks like it's finishing a classic wave 5 rally on waning momentum and notable RSI divergence (Chart 1). Do we really want to get greedy here?
Now Gold, which staged a 70 point reversal yesterday to pivot back above 1180 and squeeze out a few late shorts along the way (Chart 2).
And the S&P 500, which once again failed at trend resistance after becoming classically overbought on both daily and weekly timeframes (Chart 3).
Like my Mom used to always say, "profits are made and players get played when smart traders fade the most popular trade." In the near term, it may in fact be more about positioning than macro events, and as of right now, it seems that getting on the other side of the dollar might actually be a decent way to earn a few more of them.
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So short dollar, long commodities...?
Not quite there yet in my opinion. When is the next budget "debate" in D.C.?
More "wave" technical analysis bullshit in a world that doesn't operate in any other manner than by machinations of The Creature.
The long dollar trade is not over. As reported here a couple of weeks ago the Fed came out and said "Euro has fallen enough. We are watching" This is Central Banker code speak for "The euro has fallen enough, we do not want it to do a Yen like plunge and will be in the markets with both fist supporting the 1.236-1.240 multi-year low support level"
The dollar will continue up next year, with more noise and range bound into 1st qrt 2015. This will be due to the "euroglut capital flows" as described here a few weeks ago.
Judging by today, the long dollar trade is not over.
When the markets are crashing they will be buying those FRNs. When DXY is approaching the Volker highs this article will rank up there with some of those Kramer picks.
Jan 2015
Trains carrying US children to Venezuela....might be a clue.
Or ISIS heading to Ferguson.
Oh if only!!
Hands up.......we'll just take your head......then you can go.
Don't think so. The dollar will continue rallying as long as Europe and Japan smolders coupled with the China default risk.
Perhaps. Eventually, what part of all fiat go to zero don't people understand?
Need fiat to repay mortgages and loans. Perhaps hyper-inflation will take care of that problem. If interest rates don't get in the way. Or perhaps everyone's stuff gets repossessed anyway and then they definitely don't need fiat. Supply chain disruptions? That'll sort out people's desire for fiat, plus provide a mechanism for mortgage foreclosures, thus taking away the need for fiat.
Am I over-thinking this? Sorry, I like to look at the nut and bolts and internal mechanisms.
exactly. and while he is right... in history there are zero cases of all fiat going to zero at the same time
The long dollar trade is just in its infancy. However, the dollar is stretched currently and will take a break for a few months as gold takes center stage...
The dollar
http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...
Gold
http://www.globaldeflationnews.com/gold-elliott-waves-forecast-a-multi-m...
The belief that that traders decide the value of the dollar is hallucination.
It is decided by the central command, not traders
that would be the military central command or the white house central command?
Pentagon, Federal reserve, US treasury, CIA chiefs, house and senate finance and intelligence committees etc are part of central command.
Gang of 8 is part of that also, actually quite influential part of it
http://en.wikipedia.org/wiki/Gang_of_Eight_%28intelligence%29
What is central command's plan for all the useless SNAP babies? Trade is slowing. Even "central command" can't fix that.
You crack me up.
They're going to order AmEx to issue Black Cards to all, credit quality/history (or lack therefore) notwithstanding.
/s/
Without consumers that produce nothing, the "Market Economy" collapses into its own black hole creation. Those SNAP babies are definitely NOT useless.
There is no need for additional burger flippers. Burger flipping can be automated, but even after that obvious automation, there still needs to be burger consumers. Otherwise the capital used for the automation is wasted.
they are the burgers.
The snake eats itself starting with its own tail. At what point does the snake disappear?
Did I ever say they are succedding?
I always said central command is in civil war as to who makes decisions
dollar rally only provides the cover for additional counterfeiting operations at the FED. You can't counterfeit forever and still predetermine the value of your fiat. However, counterfeiters (first spenders) don't really care in the long run either since they gobble up real assets all the way down.
Shrot dollar, long stupidity
'Fed hinting at raising rates'....yea sure I'll believe it when I see it.
Heh heh....good one.
Say it Aint So....New ZH Identity required...
Oh yeah.....we're bringing back Captcha too.
His mom used to frequently say 'Profits are made and players get played when traders fade the most popular trade'? I don't believe that.
I'm surprised her oral cavity was unoccupied long enough to make such a profound statement.
his mother used to say THAT? what a shitty childhood.
ANALYSIS: Why the creation of money by bankers can only create havoc…and why the legislators don’t care
http://investmentwatchblog.com/analysis-why-the-creation-of-money-by-bankers-can-only-create-havocand-why-the-legislators-dont-care/
nice article. thanks for confirming what i have been staring at for a couple of months; patience is a virtue they say.
often commodities, which $ is one, spike at the end, 90 round number seems tooo tempting to wait for; perhaps 89.89---if youre lookin to be a sharp shooter
never put orders on 0s or 5s and always be in front of big figs.
thx. good info, no matter how basic, is always good to be reminded of.
There will probably be one trap move to clear out some longs before a final push to 1.15-1.18 lvl eur/usd and 128-132 usd/jpy. I think swissy is lost and usd over 1.20 regulated to dustbin of history. So on the whole, I agree the rally is nearing the end but still has some upside room to be taken advantage of early in 2015.
With Harry Reid not able to shield Obama, lets see how the budget battles between Obama and Congress turn out for King Dollar!
Just Another Dope
King Dollar going nowhere anytime soon
No the long dollar trade is not over. The U.S.A. is the best of a bad bunch and once they raise rates (even if they don't) capital will flee emerging markets into dollars, creating a squeeze on the mass of dollar debt out there.
Too many risks with the likes of Venezuela, Japan, Europe.
http://investfts.blogspot.co.uk/
yes, cash flows into EM mirror their 'returns'...rinse and repeat. capital outflows right now, and even worse given oil prices, until prices get really really cheap....then we turn the spigot back towards them for a 100% run up. i think EEM will approach 2009 lows over the next several weeks.
if we know IWM true p/e is well north of 100 (they dont count negative earnings)....what is the real p/e of IBB 500??
How is the stealth monetization of US debt being done now? Is the Belgian buyer still there? Of not who is replacing the Fed's bid?
here you go:
http://research.stlouisfed.org/fred2/series/RREPT
just a mere 240B in permanent liquidity; that can be expanded....but there are fewer 'participants' than QE....will be more difficult to 'act fast'
and lets not forget the Fed aggressively lowered rates all of 2008 with no impact on the crash.
Travel to any foreign country. What does the average person want from you ?
US Dollar, vs their own shittier fiat currency.
Long pig trade.
USD monthly is under low volatility - when vol picks up, the USD should move well beyond 90
http://bullandbearmash.com/chart/dollar-monthly-pulls-months-upside-comi...
Nothing is stopping this train. Blue skies to Reagan highs... and beyond. Everybody is onboard and even with no new buyer... she still climbs higher.
88.56 and counting.
hahaha long dollar trade over; yea right. You do understand that the FED owns the world right?
We bought it, with USDs... The USD is the only currency that matters.
The DX is going back to 120 and beyond, gold is going back to 300 and all losses from yesterday in the long dollar trade have already been reversed and then some while equities are doing the same.
Don't know. Has it gone exponential yet? If not, then NO. ;-)
http://www.cbc.ca/player/News/Business/ID/2623085441/
The Exchange with Amanda Lang | Dec 1, 2014 | 7:30
Crude and currency
Economist Jim Rickards weighs in on the impact of low oil prices on currencies
Dollar keeps going higher as capital flees Europe and Asia as their economies continue to collapse.
And as ZH talks about the trend losing steam, the Euro dives a little more :) )