The Yen conveniently turned and burned the day after this post noting that it had declined to a big time support zone. Specifically “The Yen is now at its first major support area. If it finds support here and bounces I wonder if other asset trends would reverse as well.”
Here is the daily view:
Much like a gold mining index we know and
love hate manage risk against, the Yen has positive divergence but has proved nothing yet on this bounce because it resides below the EMAs 10 and 20 and is firmly in a downtrend. Now, trends have to end somewhere; either at zero or at a reversal point. But technically, Johnny Yen may only be doing a strip tease (song ref. folks).
In the balance hang all the other asset market trends as noted.
For years I have written about poor old Uncle Buck, looking in a window on a cold night as the party patrons drink the punch. Well this party has a new featured guest; dear old Uncle Buck is making the scene and he’s pretty popular to boot.
Yes, I have had some bullish USD charts and a more bullish than not USD orientation. But in the near term there is some data that contradicts that, presented just FYI…
The public loves its dear old Uncle
Small speculators are downright lustful
Thank you once again Sentimentrader.com for providing a nice picture for perspective.
Complicating the picture is the Euro, which is in an ugly potential (i.e. not activated) H&S.
Just ask Japan. The Yen has gotten pretty frisky lately despite Japanese policy makers’ best efforts. Ouch, says the EWJ fund. Even worse, the currency hedged DXJ got clobbered 4.6 % today.
EWJ & XJY. Click for full size
Again, boiling tea kettles, sling shots and trap doors come to mind. Policy makers – including Dear (Monetary) Leader here in the US – are putting a lot of pressure on their currencies. It is not a global game of Whack-a-Mole; it is a global game of Bludgeon the Living $hit Out of a Mole.
Inflation does not work. Last I checked, the US is inflating too. It’s just that there are different dynamics involved with the reserve currency and things may not shake out right on cue in the short-term.
A subscriber sent along this link for me to read:
The Tailwinds Pushing the US Dollar Higher
I think you should read it. I have heard of this gentleman, but had not read him. I think he puts a lot of thought into his view.
FWIW, here is my (too) brief response…
“Very much agree that due to its reserve status the USD is different and the death of the dollar cult is off base.
I also think it is a worthless piece of paper (or digits) but as long as the system is intact, so too is Uncle Buck.
His view fits the chronic economic contraction being fought by inflationary policy thesis well I think.
It is only after the ‘commodity and resources’ bulls are thrown off that the unique gold sector would (theoretically) rise. There is a cottage industry of writers and analysts making their living touting ‘death of the dollar’ and I am more inclined toward CHS’s view than theirs.
As long as the system holds together, the USD is among the best in the toilet paper sweepstakes IMO.”
My final thought is that that’s a nice looking Lester he’s playing in the photo.
The ratio has made a nice bottoming pattern and is in a daily uptrend. This came at our long-watched lower moving average, the weekly EMA 100.
The weekly chart is still in a downtrend while the daily is trend up and the monthly never left its uptrend. If the weekly keeps chugging higher, gets above the EMA 45 and then resistance at 1.28, we will have some real bull festivities. Weren’t they proclaiming gold’s bull market in euros over a few weeks ago?
GLD-FXE ratio weekly chart
At the risk of revealing my inner Prechter (I am a deflationist at heart because I believe the odds are better than even that the ultimate resolution of the era of Inflation onDemand will be deflationary), here is the monthly view of the US dollar, having negated the weekly H&S (not really visible on this monthly chart) by rising above the right shoulder.
US dollar, monthly chart
An email from an NFTRH subscriber prompted me to pull up the monthly view and the recent rise has not only negated the H&S, it has brought the larger monthly basing pattern out of 2005 to a more bullish looking state, with monthly MACD green and a shape that looks pretty good.
Prechter says a coming deflation would result in a recommendation of owning cash and gold. Not even US T-bills, heretofore considered the safest repository on the planet. That is because the debts of the Federal government would be so unmanageable as to call into question its ability to make good on its obligations.
I will question how long the stock market can benefit as the world’s reserve currency helps suck funds into US assets. But US stocks for the short-term are more positively than negatively correlated to USD as the dollar sucks capital into our markets.
The Fed is trying to devalue the USD but the reserve currency is acting as a haven. The whole developed world is supposedly at [currency] war. With all those parts in motion who on earth can make total sense out of what is going on?
Maybe we do not have to make sense of every aspect of everything that is in motion now. But we should watch the USD, the kingpin lot a very sorry lot. NFTRH is going to provide space for Uncle Buck in the analysis going forward. It failed to break down and has defied the ‘death of the dollar’ cult for so long now, there must be meaning in here.
Currencies are all acting normal lately. The Yen took an express elevator to its H&S target (making new lows today, however) and the Euro declined right to target off its mini H&S and is now turning up. Uncle Buck meanwhile, needed an over bought breather and is getting one. This is not a conclusive bottom and reversal in the Euro, but it’s looking good so far.
Euro daily chart