We’re looking for a stronger dollar these days, as the reality of continued Fed tapering and a generally disappointing earnings season ( in my opinion ) begin to take their toll.
As we’ve discussed here in the past, the general effect of tightening the money supply “eventually” leads to higher lending rates/increased borrowing costs, pinching corporate earnings and pressuring stock valuations.
I think it’s fair to say we’ve most certainly seen the “mojo” taken out of the “momo” stocks in the tech sector already, as well the $BKX Bank Index ( which I follow as an additional “bellweather” for U.S Equity strength ) as it “continues” to on its path of “lower highs” and “lower lows”.
Via currencies I’ve been positioned “generally short” for several weeks now seeing AUD/JPY top out around 94.50 as well The New Zealand Dollar finally rolling over. CAD took its last breath here in just the past two days essentially “completing the trio” of risk related currencies to begin their journeys downward.
Pushing through the last remaining day or two of chop in USD, opens the flood gates “wide” to a plethora of excellent “medium term” trade opportunities long the safe havens, and short the commods.
My expectation is to see The Nikkei ( The Japanese Stock Index ) continue to lead markets “decidedly lower” ( and I’m talking like….Nikkei at 11,500 now at 14,500 type lower ) as the general lay of the land has obviously already shifted to a “risk off” / safety seeking environment.
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