I’m pleased to see that the mainstream media is finally catching up – with these headlines “now” spattered across the news at Google. Are you finally coming to understand the effects of a strong U.S Dollar? Or are you just thrilled that you can power your generator an extra day or two on the cheap?
As we’ve discussed here earlier – a stronger U.S Dollar is The Fed’s worst nightmare ( as debts payable in USD skyrocket out of control ) and is killing U.S Exports.
The “less than expected GDP” print here this morning isn’t even the half of it, as these numbers are goosed along with “all” U.S Data in a sad attempt to mask what’s really going on. The near term “sideways trading” in USD has done little to excite traders, as with the current gong show playing in The E.U / Greece.
USD has “appeared” to be the “best of the worst” with all paper currencies essentially losing value at breakneck speed.
With commodities stretched about as low as one can imagine, and USD now stretched about as far as “America can bear” it’s really only a matter of time ( a short time ) before the elastic band snaps back in “epic fashion”.
You won’t get out in time. You’ll hang on until you are swimming in a sea of red, looking for a lifeline unless you keep your eyes peeled and have the courage to “sell” when everyone else on the planet is buying.
“As we’ve discussed here earlier – a stronger U.S Dollar is The Fed’s worst nightmare…”
I get what you’re saying, but that assumes that the Fed actually thinks things aren’t going well. I disagree. I think the Fed thinks are going great. The Fed doesn’t see themselves as reporting to the real economy or to the 325 million citizens of the country. The Fed sees themselves as reporting to Wall Street and the White House. In their view, they are getting A+’s from the people whose opinion they care about. In their view, despite US corporate earnings being ripped to shreds, they only see an S&P 500 and Russell 2000 hitting record highs every day. To them, that is awesome, and then they also get the bonus of using the strong .DXY as an excuse to do nothing with rates. This is a win-win for the Fed. Rates are never going higher. They already have their built-in excuse.
Ya I can say it…..but as you’ve suggested – does it really matter?
They can’t ( and eventually won’t ) have their cake and eat it too but you’ve pretty much nailed it on the head. The Fed is taking care of the “few on Wall St.” while the majority of U.S citizens are headed for a cardboard box behind the local Burger Kong.
Although eventually…these earnings will have to have an effect on the general investment community as a whole ( not “just” Wall St. ) and there will certainly be a time when this thing backfires.
Yeah but how do you explain that USDJPY generally trades like the SP500?
Exactly. Great point.
The SP 500 has essentially been driven by USD/JPY up until recently where we’ve now seen “those last few retail investors” contribute to the ultimate rise in U.S Equities.
I’m sure you’ve noticed that USD/JPY has traded completely flat now going back to late Nov, with continued downward pressure kept on JPY ( even though it’s bottomed ) in order to keep Japan from completely imploding.
This extended period of “sideways” makes it difficult for most to see what’s really going on ( with JPY bottoming and USD topping ) but that “is” whats going on.
You’ll see this unwind in “epic fashion” when we break down from this sideway price action – and risk comes off.
USD/JPY will fall ( as will U.S equities ) – it’s just taking forever across the top.
What is your take on these counter points to your headline? http://www.marctomarket.com/2015/02/push-back-costs-of-rising-dollar.html
Marctomarket has had a one sided / lopsided view of both the U.S Dollar and more importantly the U.S economy for some time now.
He is wildly bullish and clearly believes in a an “actual” U.S recovery. I don’t believe this at all so that’s likely where our analysis / views go separate ways.
All valid points, but centered on the view that The U.S economy is well into recovery. This will be proven wrong, and likely sooner than later.
The Euro and US Dollar will always shift back and forth on the simple flow of reserves from one of the largest held reserves to the other so I don’t really consider “EURO vs USD” as any indication of “eithers” real world strength or weakness.
Yes USD is strong at the moment as EUR is weak, but this is just as likely to shift ( as oversold as EUR is and overbought as USD is ) as it always will.
It appears to me that Marc can “and will” always make a good argument “on behalf of U.S recovery”. I don’t see any arguement holding much water with this as it’s underlaying reasoning.
Kong, I think you are right with your call of a softening $. But before that thing goes down it will go much higher. My guess is that crude oil will go down in a second leg and might even see a 20 handle while at the same time the $ goes up. All the oil producing countries in the world including the U.S. are flooding the world with oil. Might take another 3 months till we see the second leg down. But it’ll come.
wow.. just stunning… same old QE news and USD just keep ramping up… hope nobody is long usd…..
sorry i mean short usd..
This is unsustainable as U.S multi nationals will be killed but….
As for any near term trading…..what can be said?
USD strength has smashed many to bits….or should I say EUR weakness?
Nuts…….but I guess markets continue to view Draghi’s complete and total destruction of EU Zone as a “good thing”.
Hard to imagine how this will play out. The short squeeze in $ goes on unabated. Wonder what the FED is thinking about the current situation.
“Draghi’s complete and total destruction of EU Zone as a “good thing”.”
You seem to not understand Kong (not meant as an insult but as sarc), markets are no longer worried/concerned about long term implications of any CB policy irrespective of how bad it is, all they care about is the “free money” now. Look at the German DAX over the past month or so. Incredible rise and still looking extremely strong. Even falls in US indices can’t stop DAX rising, and it’s all to do with the free QE money that will start next week (given the fall in EUR fx rate has also helped). Incidentally, the DAX has risen 4% since Wednesday afternoon ( as at time of writing).
So what’s your take now on JPY? Looking at US treasury curve, there is now a larger positive gap opening up in rate differentials. Any rise in US rates and the JPY and EUR will get hammered hard. Only thing I can see that will now realize a stronger JPY is a end to Japanese QE or if the Japanese bond market becomes void of foreign buyers (more articles starting to be written about this now).
With US 10yr treasury taking a pounding today, let’s see what the implications of this are next week. What we may see is emerging market debt which is denominated in US$’s come under pressure. Let’s see what impact this has on risk.
As long as US is seen as a rate positive environment, can’t see US$ falling and the FED can’t do anything about it (as much to do with JPY and EUR and rest of world being in an economic mess). In fact, I think the FED will use the strong $ to instigate a fall in US stocks so as they can start QE4.
USD booster rocket! Euro killed and JPY rockets higher with the Pound getting pounded.
EM currency looking very weak, particularly the Turkish Lira at all time lows. The South African Rand (USD/ZAR at 12.05) has also been pummeled. I’ve been keeping an eye on USD/MXN for a while now though.
The USD/MXN trade I mentioned a while ago in Kong’s buy the Peso post for me is finally here now that it’s near 15.50. This looks like a good area to finally slowly accumulate a medium-term USD/MXN short.
Will also nibble on EUR/USD for a test back to 1.10 next week. Buys look good from here to as low as 1.0760 in my opinion.
I’m with you as this is beyond comprention but hey…..it’s been this way for a couple months now and still no relief